What’s the best approach to deal with the worst economic downturn in 70 years?
ECB Chief Trichet thinks it’s all about the confidence fairies. Slashing deficits and cutting spending will make the markets feel better, and therefore growth will resume. This approach is without question the stupidest policy position held by a central banking head in living memory. It guarantees at least a decade of crippling, deflationary stagnation, accompanied by social disruption and mass unemployment.
Meanwhile, Treasury Secretary Geithner says we should not stop stimulus in the short-term and deal with deficits once it’s clear the world economy is recovering. A fine sentiment, except that the US is doing nothing to provide additional stimulus, while policymakers like Geithner and Bernanke seem to be quite comfortable with 15 million or more jobless citizens for the foreseeable future.
Gorilla says: “Not much hope when two major economic players are committed to being as stupid as possible for as long as possible!”
Tags: ECB, Geithner, Trichet, world economy