George Soros has lashed out at the focus on austerity in the United States saying it is politically driven and has nothing to do with the realities the country is facing.
Writing in the Financial Times, Soros says that, while in Europe fringe states are experiencing increasing premiums, the U.S. government is not.
The U.S., therefore, needs further stimulus, according to Soros. But it doesn’t need reckless stimulus focused on consumer spending, rather it needs those funds to be spent on investment.
He makes a key point that somehow still eludes large portions of the public.
From the Financial Times (emphasis ours):
Moreover, the simple truth is that the private sector does not employ available resources. Mr Obama has in fact been very friendly to business, and corporations are operating profitably. But instead of investing, they are building up liquidity. Perhaps a Republican victory will boost their confidence but, in the meantime, investment and employment require fiscal stimulus (monetary stimulus, by contrast, would be more likely to stimulate corporations to devour each other than to hire workers).
What’s clear is that Soros believes it’s fiscal stimulus that will push the economy forward, because it’s the only thing that will put Americans back to work.
It is not dissimilar from Richard Koo of Nomura’s arguments, who has suggested that the private sector is psychologically impaired from investing now, and is focused on hoarding cash while consumers pay down debt. As a result, the only spender in the economy is the U.S. government, and fiscal stimulus is the path to reducing the unemployment rate.