Tuesday, November 09, 2010
No not the Top Gear guy. I mean Joseph Stiglitz, one of the world’s top economists. On occasion, when some crackpot says Krugman is a little too shrill, I check the news to see what Stiglitz is saying. Call it a reality check.
Stiglitz: We need more stimulus, not quantitative easing
”All the literature about how monetary policy operates in normal times is pretty irrelevant to this situation.”
”But all the evidence is that as government spending went up during the last two years, interest rates didn’t go up, and are not likely to go up now.”
”The point is the stimulus did work. They made a very big mistake in underestimating the severity of the downturn and asked for too small of a stimulus, and they didn’t do enough in the design. About 40 percent was tax cuts, and we all knew that wasn’t going to be very effective. But it worked; without it, unemployment would’ve peaked between 12 and 13 percent. With it, it peaked at 10 percent, and that was an achievement. A better, bigger stimulus would’ve gotten it still lower. The severity of the recession was too big to be dealt with by a stimulus of that size.”
I’d love to quote that entire last paragraph. But in fairness to The Washington Post, I’ll send you there to read it.
Wrap it all up -- quantitative easing isn’t the tool of choice, more stimulus is needed because the first stimulus wasn’t enough, the tax cuts were ineffective and the States would be (will be) in real trouble without the stimulus -- and...I’m back to reading Krugman.
November 9, 2010