Stiglitz – QE2 won’t work. More government spending needed.

An interesting interview with Nobel Prize Economist Joseph Stiglitz. In reference to the US economy he does say that economies always recover but without a stimulus it will take a long time. Short-term unemployment needs to fall and this requires more government spending – not quantitative easing (QE2). As Keynes said in the long-run we’ll recover but in the long-run we are all dead. He criticises Alan Greenspan for his role as Fed Chairman in years before the financial crisis as well as the US government’s lack of prudent spending – too much on the war in Iraq rather than domestic infrastructure eg the levees in New Orleans.

He stresses the fact that government spending in infrastructure, technology, education would start to reboot the US economy – we have under invested in the economy for a long time. The US need to be careful with framing our budget but the short-term prognosis for the US economy is not good.

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