International Monetary Fund Chief Economist Olivier Blanchard says the United States needs a “credible” a plan to cut its debt and dispel fears about the economy.
“It is very important that the U.S., over the next few months or a year, puts in place a very credible, medium-term plan so we can see what happens to the debt five years out, 10 years out,” Blanchard said in an interview with CNBC. The plan “is essential. It’s not quite in place yet.”
Editor's Note: Dick Morris predicts coming Obama economic "Aftershock" —
massive inflation coming. Get details from the economists who predicted the
housing crisis and the last stock market crash. Click Here Now.
Budget deficits and sovereign debt have ballooned worldwide after governments spent trillions of dollars in stimulus to revive growth. The U.S. deficit reached $1.294 trillion in the fiscal year through September, the second highest on record. The Federal Reserve said Wednesday it will buy more government bonds, expanding record stimulus in a bid to reduce unemployment and avert deflation.
“A bit of inflation clearly would be very good,” Blanchard said, referring to the Fed’s announcement. “What we want to avoid is deflation.” The move will “probably” bolster private demand in the United States, he said.
The Federal Open Market Committee pledged Wednesday to buy $600 billion of Treasuries through June. It also kept its benchmark interest rate target for overnight interbank loans at zero to 0.25 percent, where it has been since December 2008, and left unchanged its pledge to keep interest rates low for an “extended period.”
Editor's Note: Dick Morris predicts coming Obama economic "Aftershock" —
massive inflation coming. Get details from the economists who predicted the
housing crisis and the last stock market crash. Click Here Now.
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