Fourth Quarter GDP Released
On Friday, the Department of Commerce announced that the U.S. economy grew at a 3.2% rate in the fourth quarter, an improvement from the 2.6% pace in the prior period. For all of 2010, GDP grew by 2.9% after contracting by 2.6% in 2009. The report showed that fourth quarter numbers were boosted by strong personal spending, reflected in the best holiday retail sales since 2006. The report also showed U.S. exports accelerated while the rate of import growth slowed. Company investments also helped the economy, although business spending for equipment and software slowed.
IMF Report Criticizes US Debt
On Thursday, the International Monetary Fund issued a report criticizing the U.S. response to its rising public debt. The IMF report focused on criticism that the United States is falling behind on a promise it made to other top economic countries to halve its budget deficit by 2013. At a gathering of the world’s top economic leaders in Canada last summer, U.S. officials promised to reduce the deficit to roughly 6 percent of gross domestic product. However, according to data released this week by the Congressional Budget Office (CBO), recent tax cuts and expected spending will keep the annual deficit this year at about 10 percent of GDP.
Financial Crisis Inquiry Commission Releases Final Report
On Tuesday, the Financial Crisis Inquiry Commission (FCIC) releases its final majority and dissent reports. The majority report concluded that the 2008 financial crisis was caused by the Fed’s ” pivotal failure to stem the flow of toxic mortgages,” the SEC ” [not] requiring more capital and halted risky practices,” and banks ” recklessly taking on too much risk, with too little capital, and with too much dependence on short-term funding.” The dissent report signed by FCIC Vice Chair Bill Thomas and Commissioners Douglas Holtz-Eakin and Keith Hennessey criticized the majority’s report for being ” more an account of bad events than a focused explanation of what happened and why.” The dissent also focused it blame for the crisis on policymakers who “poorly designed government housing policies that distorted market outcomes and contributed to the creation of unsound mortgages.”