George Soros: "I believe there is a strong case for further stimulus."

[Better Believe It]

America needs stimulus not virtue
By George Soros
October 4, 2010


The Obama administration’s insistence on fiscal rectitude is dictated not by financial necessity but by political considerations. The US is not in the position of Europe’s heavily indebted countries, which must pay hefty premiums over the price at which Germany can borrow. Interest rates on US government bonds have been falling and are near record lows, which means that financial markets anticipate deflation, not inflation.

Where the Obama administration went wrong was in how it bailed out the banking system: it helped the banks earn their way out of a hole by purchasing some of their bad assets and supplying them with cheap money. This, too, was guided by political considerations: it would have been more efficient to inject new equity into the banks but the president feared accusations of nationalisation and socialism.

That decision backfired, with serious political repercussions. The public, facing a jump in credit card charges from 8 per cent to nearly 30 per cent, saw the banks earning bumper profits and paying large bonuses. The Tea Party movement has exploited this resentment and Mr Obama is now on the defensive. The Republicans campaign against any further stimulus and the administration now pays lip service to fiscal rectitude, even if it recognises that deficit reduction may be premature.

I believe there is a strong case for further stimulus. Admittedly, consumption cannot be sustained indefinitely by running up the national debt. The imbalance between consumption and investment must be corrected. But to cut government spending at a time of large-scale unemployment would be to ignore the lessons of history.

Read the full article at:

http://www.ft.com/cms/s/0/61a77634-cfeb-11df-bb9e-00144feab49a.html

[nashville_brook]

1. more stimulus, and more *visionary* spending. glad that we're fixing potholes & bridges, but

we need to also be thinking on the scale of Hoover Dam. lets get serious about high speed rail. lets get serious about walking/biking cities. and this isn't just to put yellow lines on the side of existing roads -- we need dedicated non-motorized paths for people to feel safe.

[TexasObserver]

2. I agree and have called for another trillion all year.

Infrastructure programs and jobs programs are what we need.