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Was the Fed action enough to offset the contraction?
Spent in one year on construction, research or equipment, it might well offset the contraction at first.
Even in 2001, a year in which a recession occurred, there was enough growth to offset the contraction in two of the quarters.
"Strong export growth, which has hitherto helped offset the contraction in domestic demand, has of late started to decrease reflecting weakening demand from the rest of the euro area".
They argued that if the Fed had acted as a lender of last resort, as it was created to do, it could have stopped the Great Depression in its tracks by expanding the money supply so as to offset the contraction that bank failures caused.
But then there wasn't actually all that much stimulus either: the $800 billion splashed out at Federal level rather neatly offset the contraction of State and local governments.
Similar(54)
Monetary stimulus from the Federal Reserve, while under fire from some Republicans, is also helping offset the fiscal contraction.
"Depreciation isn't enough now to offset the global contraction," said Mr. Setser, noting that export powers like Japan, Korea, Taiwan and Brazil have had rapid declines in sales in recent months.
Second, while the fiscal stimulus in ARRA was far from perfect, it helped to quickly offset the sharp contraction that was the Great Recession.
So in the near term, the government has to be prepared to spend to offset the big contraction in demand as people become more cautious and begin to save more.
The first national relief effort we should pursue is an alliance of mayors and governors to promote a national revenue-sharing program, which would offset the harsh fiscal contractions that practically every state will require.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com