Tim Geithner Calls For Fiscal AND Monetary Stimulus


Treasury Secretary Tim Giethner:

Fiscal policy everywhere has to be guided by the imperatives of growth. Where deficits and interest rates are too high, governments have no choice but to consolidate. Where fiscal positions are stronger and interest rates low, some countries have room to take more action to support growth, and others can at least slow the pace of consolidation. Where more fiscal reforms are necessary to achieve long-run sustainability, the emphasis should be on policy changes that take effect over the medium term.

As for monetary policy. with growth slower and oil prices lower, inflation risks are on average, though not everywhere, less acute. This means some central banks will continue to ease policy, while some will keep rates lower longer and slow the pace of expected tightening. None of the major central banks are out of ammunition. The repair and restructuring of financial systems has to be accelerated where it has lagged. Countries that forced more capital into their banking systems early in the crisis are better placed to support the recovery. Those that did not should move more forcefully now.

Conservative economists not burdened with a shitty educational background agree: we need stimulus, period. Some economists agree we need fiscal stimulus (mostly liberal), others monetary, but we actually need both. We need monetary stimulus to make lending cheaper and fiscal stimulus to actually make the money circulate faster. It’s really a duh moment unless your mind is clouded with politics and ideological preferences.


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