Headwinds

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Economic recovery will be delayed and difficult, and here are two reasons why. First (chart above), the personal savings rate among Americans has turned abruptly upward. That means that purchases of discretionary consumer items will likely remain depressed for some time. Second (chart below), interest rates are headed up despite the recession because the U.S. Treasury is flooding the market with long bonds--too much supply, too little demand. And higher rates are a drag on economic growth. The Federal Reserve hopes to counteract that drag by buying up U.S. bonds. Unintended consequence? Inflation.