Showing posts with label fiscal policy. Show all posts
Showing posts with label fiscal policy. Show all posts

Sunday, September 04, 2016

Rajan Is Right

Raghuram Rajan, India's Departing Central Banker, Has a New Warning 

2008 was a wasted crisis. It was a crisis that could have helped the world take one big leap towards a knowledge economy. The world had an opportunity to shape globoeconomics, a new third dimension to the traditional micro and macroeconomics. Some new global institutions were needed. America needed a three trillion stimulus with much of that money ending on Main Street, but instead ended up with a much bigger monetary stimulus with all the money ending up on Wall Street, pretty much free.

If the interest rates stay at near zero for long enough, it is no longer a tool, is it? But what if that has been your only tool? Then you have no available tool the next time a big crisis hits.