Tags: Barton Biggs | US | Needs | Massive | New | Public | Spending

Biggs: US Needs Depression-Era Tactics to Snap Out of Funk

Tuesday, 05 Jul 2011 08:46 AM

Only a huge new government intervention is going to fuel robust economic growth, a hedge fund manager says. Massive hikes in government infrastructure spending similar in scope to those used in the Great Depression are needed, says Barton Biggs, managing partner at Traxis Partners.

Otherwise, get used to anemic growth rates and continued high unemployment figures.

"What the U.S. really needs is a massive infrastructure program… similar to the WPA back in the 1930s," Biggs tells The Wall Street Journal, referring to Works Progress Administration, a public development program that employed millions.

bartonbiggs200file.jpg
Barton Biggs
(Traxis Partners/file photo)
Otherwise, economic growth rates will be stuck around 2 percent at best, far from 3.5 percent to 4 percent before the recession.

The Federal Reserve recently wrapped up a $600 billion bond buyback program intended to stimulate the economy.

Although such policy, known as quantitative easing, isn't likely to return since it was designed to make lending conditions more attractive but not immediately put large numbers people back to work, Biggs says.

Unemployment continues to plague the U.S. economy, making millions of Americans feel the country is still mired in recession even though the economic downturn officially ended two years ago.

In fact, the situation is getting worse.

Nationwide, the unemployment rate rose in May to 9.1 percent from 9 percent in April, with employers adding just 54,000 net jobs.

Employers added an average of 220,000 jobs per month in the previous three months.

"You're seeing soft patches nationwide," says Mike Lynch, a regional economist at IHS Global Insight, according to the Associated Press.

Other economic experts agree that the United States is still in deep trouble.

Peter Schiff, CEO & Chief Global Strategist at Euro Pacific Capital, says the U.S. economy is stuck in a depression, not recovering from a recession, thanks to lax U.S. monetary policy, so investors would be wise to ditch dollars and invest in gold.

The dollar could lose 50 percent to 70 percent of its value, Schiff tells Newsmax.TV.

The Federal Reserve has ended a $600 billion bond buyback, known as quantitative easing, but don't expect its overall loose monetary policies to change.

Such programs temporarily prop up the economy and are politically popular, but they don't right the economy for the long term and jack up inflation rates and weaken the dollar in the process.

"I actually think we are in a depression, and a depression is interrupted briefly by the phony expansion that we get from the stimulus," Schiff tells Newsmax.TV.

But others see better times ahead.

Mark Zandi, chief economist at Moody's Analytics, tells Yahoo Tech Ticker that the worst of the downturn has already occurred.

"We've seen the bulk of the slowdown," he says. "I think we're going to reaccelerate," he says. "The consensus is overly pessimistic."

Most economists, including at the Fed and IMF, now expect second half growth below 3 percent, but Zandi predicts the U.S. economy will rebound to close to 3 percent growth in the third quarter and approach 4 percent in the fourth, Yahoo reports.

Zandi's optimism is based on a view that the first half slowdown was due mainly to rising energy prices and the dramatic downturn in Japan's economy following the devastating earthquake and tsunami last March.

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Only a huge new government intervention is going to fuel robust economic growth, a hedge fund manager says. Massive hikes in government infrastructure spending similar in scope to those used in the Great Depression are needed, says Barton Biggs, managing partner at Traxis...
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