Friday, February 26, 2010

Former Fed Governor Robert Heller: "Double Dip Still in the Cards"

Judging from what we hear from current Federal Reserve members versus previous members, it appears one is only allowed to whisper about reality once you exit the body.  Below we have a 5 minute video from former Fed Governor Robert Heller who opines about many of the same issues discussed on the blog on a daily basis.  Of course it was not on CNBC USA, but pushed off into Asia because it doesn't fit the green shoot mosaic. ;)  Kind of strange to hear a former Fed Reserve member sound all "doomsy" aka Marc Faber, rather than whistling about the Alice in Wonderland existence we enjoy.
  • “A double dip recession is still very much in the cards,” Heller told CNBC.  “The big elephant in the room is the huge federal deficit, and that will eventually will force up interest rates. And as interest rates go up, it will kill both businesses and consumer recovery.”
  • Therefore the economy is likely to weaken again, said Heller. He expects a spike in interest rates in the near future, which he described as the "danger" awaiting investors.
My only disagreement with Heller here, is not knowing when interest rates will "spike" - with so much damage in Europe, and Japan - the US is still benefiting from the 'safety trade', and as people pile into bonds each time the S&P drops 0.5%, along with quantitative easing policies, knowing the timing of the visit from the bond vigilantes is nearly impossible.

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