Wednesday, October 6, 2010

Stiglitz: Liquidity Pump by the Fed is Causing Chaos Around the World

As if anyone did not know by now (or is not reading this blog!), Joseph Stiglitz, Nobel Prize-winning professor at New York’s Columbia University, said today: “The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the U.S. economy and causing chaos for the rest of the world,” 

Stilglitz confimed that the a flood of liquidity from the Fed and the ECB is bringing instability to foreign-exchange markets, and is forcing countries such as Japan and Brazil to defend its exporters.

As we reported yesterday, Brazil doubled a tax on foreign investment into local government bonds.
while Japan engaged in the silly lowering of  its target interest rate plus announced buyig of its own bonds
Stiglitz added that "It's natural in that context for them to say -- we can'tjust let our exchange rates appreciate and destroy our exports,"

"[...] additional monetary stimulus will clearly not solvethe problems caused by lack of global aggregate demand". "Lowering the interest rates may help a little bit, but that's much too weak to address the problems facing the United States and Europe," "We need fiscal stimulus."

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