If the Obama administration makes full employment a primary target, Americans’ confidence in the economy would be swiftly restored, says Yale professor and MacroMarkets Chief Economist Robert Shiller.
"At the moment, inflation is no longer the fundamental risk," Shiller writes in The New York Times.
"Our current problems are deflation and recession — possibly even depression — and so we must rethink our targets."
Obama’s goal, Shiller observes, is to add 2.5 million jobs to the economy by hiring people to repair and improve U.S. infrastructure.
“All of that is fine, but it does not represent a commitment to full employment, providing a job for everyone who is willing to work,” Shiller says.
“As a result, confidence remains abysmal.”
According to Shiller, an immediate shift to full employment may be impossible simply because no one believes full employment is attainable.
“People seem to believe that central banks can control inflation, (but) there is little consensus that central banks can prevent a depression under circumstances like this,” he says.
A recent poll taken by the Pew Research Center found that 59 percent of those surveyed are cutting back on purchases because they fear their finances might worsen.
With Americans continuing to render extremely bleak assessments of economic conditions, a psychology of bad times is becoming the mindset of the public, Pew researchers wrote.
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