Tags: robert | Reich | Monetary | Stimulus | Economy

Reich: More Monetary Stimulus Won’t Pull Economy Out of Tank

By    |   Thursday, 23 Sep 2010 09:20 AM

With fiscal policy deadlocked, some experts say more easing from the Federal Reserve is necessary to lift the economy from its sluggish growth path.

But Robert Reich, Labor Secretary under President Clinton, says that won’t do the trick.

“Even though the economy is heading downward, flooding it with more money may not help,” Reich wrote on Business Insider.

“The problem isn’t the cost of capital. Most businesses can get all the money they need. Big ones are still sitting on $1.8 trillion in cash.”

Instead the problem is consumers, who account for 70 percent of economic output, he says.

“They can’t and won’t buy enough to turn the economy around. Most don’t qualify for more credit given how much they already owe or have already defaulted on.”

Fiscal and monetary stimulus can’t go on forever, Reich notes.

“The economy would have to be able to run on its own,” he writes. “But it can’t run on its own because consumers have reached the end of their ropes.”

Reich’s solution: “Reorganizing the economy to make sure the vast middle class has a larger share of its benefits.”

Not everyone sees it Reich’s way.

"It's really hard to get from where you are now to that (3-4 percent) growth path without them (the Fed) doing something," John Canally, chief economist at LPL Financial, told Reuters.

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With fiscal policy deadlocked, some experts say more easing from the Federal Reserve is necessary to lift the economy from its sluggish growth path. But Robert Reich, Labor Secretary under President Clinton, says that won t do the trick. Even though the economy is...
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2010-20-23
Thursday, 23 Sep 2010 09:20 AM
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