Home > Cande = Conjecture & Exaggeration, Fande = Fact & Evidence, The Economy > Wall Streeters: “Liquidity-addicted creatures that are detached from reality”

Wall Streeters: “Liquidity-addicted creatures that are detached from reality”

EXCERPTS:

“Yet, in an irrational reactionary fit, many policy makers around the world want us to pay collectively for the sins of an out-of-control financial system by cutting public spending in areas suddenly deemed unnecessary, such as education and health care.

With enough austere finger-waving, they almost sound convincing, speaking in the name of markets that are about to massively sell countries’ sovereign debt and make everything 10 times worse unless something is done to fix deficits.

What a breath of fresh air it was to hear Nobel-Prize-winning economist Joseph Stiglitz answer Rubin’s question in another panel at the conference on Tuesday Read more on Stiglitz’ remarks:

“We have a problem of aggregate demand,” Stiglitz said. “It makes no sense that we are laying off teachers and building up long-term unemployment. We should push the states to expand instead.”

The U.S. overall needs more fiscal spending, and states should expand and be aided by the government, not only because it alleviates human suffering but because it makes economic sense.

Stiglitz noted that fiscal spending did work in the U.S. in 2009, though it was not enough and not structured well enough to have a lasting impact.

Absent of a real economic recovery, the Federal Reserve’s quantitative easing measures seem to be yet another way for investment banks to obtain cheap dollars and fuel bubbles in asset prices and in some emerging markets, as noted by both Stiglitz and Mohamed El-Erian, chief executive of bond fund giant Pimco.

No one knows for sure whether the measures will work, but absent of any fiscal spending, they do make markets seem like liquidity-addicted creatures that are detached from reality: Maybe a popular costume at Halloween parties on Wall Street this year.”

source: http://finance.yahoo.com/banking-budgeting/article/111147/a-treat-for-markets-a-trick-for-the-rest-of-us?mod=bb-budgeting&sec=topStories&pos=8&asset=&ccode=

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