Article;
Premature for FED to Wind- Down Stimulus Nobel Prize Winner Joseph Stiglitz
Comment:
Earlier the Fed
said it will continue Quantitative-Easing (QE) unless unemployment rate drops
to 6.5%. The stock market has bounced back and we can hope that the money will
find its way through it. The market (i think) has breached liquidity trap
because people have resumed spending. At least green shoots are there.
Inflation rose and it is falling with the Fed’s announcement to taper QE off.
Inflation targeting and a higher inflation will make the sitting on cash
unattractive and will make people spend more. And, if they are expecting deflation
they will hoard more cash because that will increase the value of money when
inflation goes down. As long as stock market is receiving the money we can
expect that it will boost economic activity and reduce unemployment. The
program has shown its results as far as inflation is concerned. It is moving
with the commitment to continue, up to up and down to down. Moreover it is not
debasing the currency. The dollar has again emerged as a strong currency even
after all the easing. Both monetary and fiscal policies affect the value of
currency. Both can achieve depreciation which the US wanted to achieve in order
to boost exports but loose monetary policy by the other central banks has not
let the objective materialized. And, fiscal policy has/had little room to
expand; the Government deficit and debt are high...
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