Thursday, April 16, 2009

Shiller strikes again.

Bob Shiller doesn't see any green shoots or rays of light. In fact he says that:

"It is now time to stimulate demand. It is also time to repair the credit system. Those are the two targets that must be hit to get us out of the current economic slump, and to restore confidence. It will be costly to meet both of these targets, and it will require new legislation to give enhanced regulatory powers to deal with a greatly changed financial system, now in a systemic slump.

It is time to face up to what needs to be done. The sticker shock involved will be large, but the costs in terms of lost output of not meeting either the credit target or the aggregate demand target will be yet larger."

I guess I should point out this was written yesterday, not last summer.

He also says that the main factor holding back the real ramping up of fiscal and monetary expansion is CEO pay. Seriously!

"In this crisis, acceptance of these measures is being replaced with outrage. It is increasing the blood pressure of the public, and that can’t continue without damage to our system. Compensation practices in the U.S. need to be made fairer. Vast earnings shouldn’t go virtually untaxed, while the middle class is paying a sizable fraction of each extra dollar in taxes. Only then will the government have the mandate to restore our banking and securities institutions to their proper strong role in our economy".