Richard Koo: The Market Has Convinced Itself That People Are Spending More Money But It's Wrong

While the market has convinced itself that the money supply has increased, people are spending more, and inflation is rising, it simply isn’t true, according to Nomura’s Richard Koo.

Speaking to Bloomberg Television, Richard Koo points out that no matter how much liquidity the Fed (or ECB or BoE) inject into the market, it will not be taken up because people are deleveraging.

This is traditional Koo, pointing to Japan’s experience as an example for the U.S. He also notes that Bernanke has come around to understanding that monetary easing alone can’t fill the gap, and that fiscal policy may now be on the only answer.

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