AUSTAN GOOLSBEE: I think the world vests too much power, certainly in the president, probably in Washington in general for its influence on the economy, because most all of the economy has nothing to do with the government.
http://www.cbo.gov/publication/44521Harmful Effects of Large and Growing Debt
How long the nation could sustain such growth in federal debt is impossible to predict with any confidence. At some point, investors would begin to doubt the government’s willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Moreover, even before that point was reached, the high and rising amount of debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget:
Increased borrowing by the federal government would eventually reduce private investment in productive capital, because the portion of total savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income in the long run than would otherwise be the case. Despite those reductions, however, the continued growth of productivity would make real (inflation-adjusted) output and income per person higher in the future than they are now.
Federal spending on interest payments would rise, thus requiring larger changes in tax and spending policies to achieve any chosen targets for budget deficits and debt.
The government would have less flexibility to use tax and spending policies to respond to unexpected challenges, such as economic downturns or wars.
The risk of a fiscal crisis—in which investors demanded very high interest rates to finance the government’s borrowing needs—would increase.
Last edited by jonny5; 06-29-14 at 07:15 AM.
It is time that the US government stop trying to correct market fluctuations and the American people learn to live with what the market provides. Altering interest rates an falsely increasing the money in the market is not a long term fix to economic problems, it is the problem. The Obama administration, joined by the Bush administration have time after time been blind to this.
Plus, to assume that when he appointed Bernanke and Yellen he did not make sure that they were going to 'play ball' when he asked them to (like to try to stimulate the economy just before an election) would be extremely naive, IMO.
He has, IMO, a huge influence on what the Fed does and thus has a huge influence on monetary policy.
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