America is running out of time to fix its huge economic and fiscal problems, warns former Fed chair Paul Volcker, who now heads a financial advisory board to President Obama.
"Restoring our fiscal position . . . sorting out a reasonable approach toward limiting carbon omissions, and producing domestic energy without unacceptable environmental risks all take time," Volcker writes in The New York Review of Books.
"We'd better get started. That will require a greater sense of common purpose and political consensus than has been evident in Washington or the country at large."
The risks associated with the virtually unprecedented levels of public debts as the U.S. emerges from recessions are evident, Volcker notes, and must be effectively dealt with now. Dealing with uncontrolled borrowing is “not a matter of intellectual awareness but of practical confrontation,” he says.
Anyone needing illustration of the economic threats of uncontrolled borrowing needs only to look at Europe, where $1 trillion has been marshaled from national and international resources to deal with rebalancing the European economy, Volcker notes.
“Financing can buy time, but not indefinite time,” he points out. “The underlying hard fiscal and economic adjustments are necessary.”
The fate of the euro zone’s lopsided recovery will continue to depend upon the strength of external demand, says ING economist Martin van Vliet.
Domestic demand is likely to be “hit by the impact of the draconian austerity measures in the periphery, and the broader confidence fallout from the sovereign-debt turmoil,” van Vliet told Bloomberg Business Week.
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