Robert Shiller, the Yale economics professor who correctly predicted the real estate bust, says the United States needs additional economic stimulus from the government.
“Maybe the administration is a little optimistic, and we need more stimulus,” he told Bloomberg TV.
“The Federal Reserve predicts that the unemployment rate will top out just below 9 percent, but if you go back to the early 1980s, it got up to something like 12 percent.”
This economy clearly resembles that time period, Shiller says. Moreover, the problems are global.
“Obama is going to the G20 meeting urging coordinated stimulus across countries,” Shiller explains. “That’s what we really need. But it doesn’t look like he’s going to get it. That’s not good either.”
While the expanding U.S. debt burden is a concern, economic weakness trumps that, he says.
“We’re worried about the national debt and about our ability to continue to borrow,” Shiller acknowledges.
“But you have to weigh these things. My thinking now is that the economy is deteriorating at too rapid a rate. We just have to bite the bullet and accept the debt consequences of a stronger stimulus.”
Concern that foreigners will stop financing our debt is legitimate, Shiller says. “Still, at this time, things look okay.”
Other experts agree that the government needs to adopt greater stimulus. For example, bond giant Pimco’s executives have told reporters the Fed should double its balance sheet to $6 trillion.
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