The U.S. economy is in a state of a panic that predated the official recession and may have significant long-run implications, Fed Governor Kevin Warsh said on Monday.
In remarks to the Council of Institutional Investors, Warsh said that while the pace of economic decline was likely to abate, “I am decidedly uncomfortable forecasting a sharp and determined resumption of growth in the coming quarters.”
Warsh used the word “panic” more than 30 times in his speech — entitled “The Panic of 2008” — and said both faulty private practices and flawed public policies were to blame for causing it.
“The panic conditions that have marked this period may also have long-run implications,” he said. “I suspect that the process of an efficient reallocation of capital and labor will prove slower and more difficult than is typical after recessions.” [via Reuters]