Complacency masks deteriorating conditions. Hope springs eternal that central banks will solve all problems. Eventually, they exhaust workable policy measures.
The normally optimistic Fed sounded dour in its latest FOMC minutes, saying:
"Information from manufacturing and transportation firms was generally less optimistic than earlier in the year. There were a number of reports of slowing sales to Europe and Asia."
"Contracts in some parts of the country also indicated that firms had become more cautious in their hiring and investment decisions, with most capital investment being undertaken to improve productivity and reduce costs rather than to expand capacity."
"Some participants cited examples of business contracts saying that heightened uncertainty about future tax and regulatory policies had led them to put potential investment projects on hold until the uncertainty is resolved."
America's economy is in the early stages of confronting two shocks - Europe's deepening recession and a clouded fiscal outlook.
Monetary policy is a weak antidote to more fundamental problems, it suggested. It's also worried about structural unemployment, inflation, and unprecedented wealth destruction.
From 2007 - 2010, it collapsed an epic 39%. In 2010 dollars, median household net worth declined from $126,400 to $77,300. It's down to 1992 levels. Fifteen years of wealth accumulation vanished. Left unsaid is how much more may follow.