Jumping in Pools is proud to present interview number 101 in our ongoing interview series. Today we are interviewing Lee Ohanian, a professor of economics from UCLA. He received his Phd from the University of Rochester and is advising the Federal Reserve Bank of Minneapolis. He wrote a fantastic piece about the causes of the Great Depression which caught my eye last year. He was also interviewed by Reason and has been featured on Forbes.
1. During the current recession, do you believe that unemployment has peaked or may rise further?
Unemployment has likely peaked, but it is very worrisome that it is not coming down, despite the fact that the recession hit bottom a year ago. Since that time, real output has been growing, but jobs are not coming back.
2. Do you foresee a period of inflation exceeding 5% annually within the next decade?
Inflation is very hard to forecast, based on my work with Atkeson. Five percent is certainly possible, and higher is also possible. It will depend on the Fed's ability to withdraw liquidity when broader measures of the money supply begin to rise.
3. Which do you believe was a larger influence in damaging the economy: the banking collapse or higher energy prices?
Banking collapse was damaging, but was over very quickly. The most troubling issue now is that energy prices are down, and the banking sector has been restored, but jobs are not coming back.
4. How will liquidity affect the market in the next five years?
There is a lot of liquidity in the banking system, so there is the potential for banks to make lots of loans. The reason they aren't doing much lending now is partially because the demand for investment is way down, reflecting the weak economy.
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