Here's Richard Koo's New Blistering Presentation On Why QE2 Has Been A Disaster

Richard Koo

Monetary policy has failed alone to lift the U.S. economy, because the private sector is obsessed with minimising debt, according to Nomura Chief Economist Richard Ko.

Speaking this weekend at George Soros’ Institute for New Economic Thinking conference at Bretton Woods, Koo outlined why the U.S. and Europe have missed the lessons of the Japanese experience.

Koo’s presentation explains how the U.S and Europe have expanded their monetary base, but that this flood of cash isn’t driving economic growth because banks, businesses, and people are paying down debt. Koo says that only the government can step in to spend the excess savings in the market.

The U.S. housing market resembles that of Japan's

Cutting rate to zero has not cured the unemployment crisis

Quantitative easing programs and policy easing is not increased the U.S. money supply

And it hasn't worked in the EU either

Nor has it worked in the UK

Monetary policy has been ineffective in reducing unemployment

In Japan, it took a decade for businesses to deleverage

But Japan's GDP still grew, because the government was willing to spend

The Japanese government became the borrower, because businesses weren't interested

Austerity cuts actually hurt the Japanese economy and increased its government deficit

Debt shifts from the private to the public sector in Spain

And the same is occurring in Ireland

Private sector savings are increasing ahead of public sector debt

Japan is now running trade surpluses, and they're growing

In China, domestic demand is set to rise, and its wages will rise too

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