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Argos Media

SPIEGEL Interview with Economist Joseph Stiglitz: Government Stimulus Plans are 'Not En... - 0 views

www.spiegel.de/...0,1518,616743,00.html

Economy Joseph Stiglitz

shared by Argos Media on 02 Apr 09 - Cached
  • Stiglitz: It's going to be bad, very bad. We're experiencing the worst downturn since the Great Depression, and we haven't reached the bottom yet. I'm very pessimistic. Governments are indeed reacting better today than during the global economic crisis. They're lowering interest rates and boosting the economy with economic stimulus plans. This is the right direction, but it's not enough.
  • SPIEGEL: … and let them go bankrupt? Stiglitz: No, they have to be saved, because the consequences to the monetary system would be incalculable. But as a countermeasure, these institutions have to be nationalized, which even Alan Greenspan is now demanding. Then the government can close those business segments that have nothing to do with lending and make sure that the banks no longer organize esoteric stock deals that they themselves do not understand.
  • The state of our financial system, for example, is worse than it was 80 years ago.
  • ...7 more annotations...
  • Stiglitz: The banks that survived 80 years ago continued to lend money. Today many banks aren't lending money anymore, above all the large investment banks. This will deepen the crisis.
  • SPIEGEL: The US government's emergency plan is supposed to prevent this, though. The banks receive money from the state so they can continue to give loans. Stiglitz: That's the idea, but it doesn't work. We're just throwing money at them and they pay billions of it out in bonuses and dividends. We taxpayers are being robbed for all intents and purposes in order to reduce the losses that some wealthy people bear. This has to be changed.
  • SPIEGEL: The American government has committed over a trillion dollars to save the banks and $789 billion to boost the economy. Do you think this is too little? Stiglitz: I do. More than $700 billion sounds like a lot, but it's not. On the one hand, a large part of the money will first be given out next year, which is too late. On the other, a third of it is drained away by tax cuts. They don't really stimulate consumption, because people will save the majority of that money. I fear that the effect of the American economic stimulus plan won't be even half as big as expected.
  • SPIEGEL: Washington sees it that way, too. In particular, it wants countries with strong exports, like Germany, to offer further economic stimulus packages. Do you think that's justified?
  • Absolutely. Export surpluses are counterproductive in times of economic crisis. They have to be reduced through economic stimulus programs, for example.
  • I propose that countries with a positive trade balance should stream part of their surplus to the International Monetary Fund. This can then stimulate the economy in developing countries or prevent the economy from collapsing in Eastern Europe.
  • The Americans have always been masters at changing a supposed regulation measure into further deregulation.
Argos Media

SPIEGEL Interview with Economist Joseph Stiglitz: Government Stimulus Plans are 'Not En... - 0 views

www.spiegel.de/...0,1518,616743-2,00.html

Economy Joseph Stiglitz

shared by Argos Media on 02 Apr 09 - Cached
  • SPIEGEL: The economic crisis has severely damaged the economic model of finance-driven turbo-capitalism. Will this lead to a renaissance in the state economy? Stiglitz: I don't think so. The fall of the Berlin Wall really was a strong message that communism does not work as an economic system. The collapse of Lehman Brothers on September 15th again showed that unbridled capitalism doesn't work either.
  • SPIEGEL: Could authoritarian systems like in China be the future? Stiglitz: Besides the two extremes of communism and capitalism, there are alternatives, such as Scandinavia or Germany. The Chinese model has succeeded very well for their people, but at the price of democratic rights. The German social model, however, has worked very well. It could also be a model for the US administration.
  • SPIEGEL: The opposition in Germany is already complaining about government stimulus funding for infrastructure in developing countries. Stiglitz: All the more reason for governments to persuade their people that it is in our own interest that all national economies grow. If banks in Eastern Europe collapse, it weakens Western European banks and then American financial institutions. If we are to learn one thing from the economic crisis, it's this: Globalization can't be stopped. It has to be managed or else the global economy won't work.
Pedro Gonçalves

A Contagion of Bad Ideas - Joseph E. Stiglitz - Project Syndicate - 0 views

www.project-syndicate.org/...English

Economy

shared by Pedro Gonçalves on 06 Aug 11 - No Cached
  • A busted bubble led to a massive Keynesian stimulus that averted a much deeper recession, but that also fueled substantial budget deficits. The response – massive spending cuts – ensures that unacceptably high levels of unemployment (a vast waste of resources and an oversupply of suffering) will continue, possibly for years.
  • even as Europe’s leaders promised that help was on the way, they doubled down on the belief that non-crisis countries must cut spending. The resulting austerity will hinder Europe’s growth, and thus that of its most distressed economies: after all, nothing would help Greece more than robust growth in its trading partners. And low growth will hurt tax revenues, undermining the proclaimed goal of fiscal consolidation.
  • The ECB argued that taxpayers should pick up the entire tab for Greece’s bad sovereign debt, for fear that any private-sector involvement (PSI) would trigger a “credit event,” which would force large payouts on credit-default swaps (CDSs), possibly fueling further financial turmoil. But, if that is a real fear for the ECB – if it is not merely acting on behalf of private lenders – surely it should have demanded that the banks have more capital.
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  • the ECB should have barred banks from the risky CDS market, where they are held hostage to ratings agencies’ decisions about what constitutes a “credit event.”
  • the extreme right threatened to shut down the US government, confirming what game theory suggests: when those who are irrationally committed to destruction if they don’t get their way confront rational individuals, the former prevail.
  • with housing prices continuing to fall, GDP growth faltering, and unemployment remaining stubbornly high (one of six Americans who would like a full-time job still cannot get one), more stimulus, not austerity, is needed – for the sake of balancing the budget as well. The single most important driver of deficit growth is weak tax revenues, owing to poor economic performance; the single best remedy would be to put America back to work. The recent debt deal is a move in the wrong direction.
  • bad ideas move easily across borders, and misguided economic notions on both sides of the Atlantic have been reinforcing each other. The same will be true of the stagnation that those policies bring.
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