or heading toward a “ double - dip ” recession. real gross domestic product ( gdp ) growth had slowed from 5 percent in the fourth quarter of 2009, to 3. 7 percent in the first quarter of 2010 and to only 1. 7 percent in the second quarter. soft patches are common in expansions, but are difficult to distinguish from a more serious deterioration in an expansion. examples of soft patches include the expansions of 1976 and 2002 ( chart 24 ). foreign risks also appeared on the radar screen with growing concerns about debt sustainability in greece, ireland, portugal and spain. this can be seen in the sharp rise in the sovereign risk spreads for these countries ( chart 25 ). at the same time, core consumer price index ( cpi ) inflation, which is used as an indicator of where overall inflation is heading, was low and trending downward ( chart 26 ). given the fomc ’ s dual mandate to promote price stability and maximum sustainable growth, the risk of a double - dip recession in 2011 was a concern. in more normal times, the fomc could respond to this risk by deciding to reduce the fed funds rate. however, with the fed funds rate essentially at zero, other options had to be considered. at their november meeting, the fomc decided to restart its large - scale asset purchases by announcing an intention to purchase an additional $ 600 billion in treasury securities. again, as with its earlier asset purchase program, the intent was to improve financial market conditions and thereby reduce the risk of the economy stalling. subsequent to the fomc ’ s decision, a compromise was reached on extending the bush tax rates in conjunction with additional fiscal stimulus measures for 2011. the flow of economic data as 2010 came to a close on balance indicated that the economy was in fact regaining its lost momentum. economists began to mark up their forecasts for 2011 economic growth. this recent improvement in the economic outlook is welcomed news. we should keep in mind, though, that there is considerable uncertainty associated with every economic forecast. there are both upside and downside risks that could cause actual economic growth this year to deviate from the consensus forecast. one important downside risk to the outlook is associated with housing markets. following the end of the homebuyer tax credits, there was a sharp drop - off in home sales. in addition, the firming of house prices noted earlier has given way to renewed house price declines in many markets ( chart 27 ). there still remains a significant

, in fact, the opposite : a dominant technology, a winner - takes - all player or a set of market behaviour rules such as the basel capital adequacy rules are hardly the world of atomistic competition of the textbooks. far from demonstrating adam smith ’ s invisible hand, globalisation is occurring within a complex set of rules, technical standards and regulations – some imposed by governments, but others by technological imperatives or by the private players in markets. this is not to suggest that the end - point should be the 19th century brand of capitalism foreseen by some of the global triumphalists. “ on the brink of the 21st century, the united states is at a point reminiscent of its entry into the twentieth. … today, of course, the new frontier is the global economy. ” ( zuckerman 1998, p. 20 ). not everyone feels so warmly sentimental towards the age of robber baron capitalism, and some may feel uncomfortable with the idea that “ unimpeded access to friedman ( 1999, p. 85 - 86 ) comes close to putting this pure free - market view : “ those people who are unhappy with the darwinian brutality of free - market capitalism don ’ t have any ready ideological alternative now. when it comes to the question of which system today is the most effective at generating rising standards of living, the historical debate is over. the answer is free - market capitalism … today there is only free - market vanilla and north korea. ”. that burgeoning marketplace was the one indispensable condition for the flowering of american enterprise ” ( ibid, p. 20 ). 5 we need to ask, at the same time, whether the allocation decisions of the electronic herd make sense from an economic viewpoint – are they shifting the capital ( and the real resources it represents ) to the highest global usage? on recent performance, the answer would have to be “ no ”. leaving aside the extraordinary volte face from optimism to pessimism in asia ( and the mis - allocated investment that preceded the crisis ), does the reassessment of us equity prices in 1987 ( in the deepest market with the fullest information ) make sense? or the gyration of the yen / us dollar rate, from 80 in april 1995 to 147 a couple of years later? are markets, with their constant quest to respond to the latest data, factoid, or rumour, the best allocators of capital and reliable guardians on the gateway