Stiglitz: Bernanke Has The Right Diagnosis But The Wrong Cure

Professor Joseph Stiglitz of Columbia University spoke to CNBC and David Einhorn this morning.

  • 0:40 Bernanke’s diagnosis on the economy is right. We’re unlikely to see an employment recovery where we get to normal unemployment in the next 4-5 years. Something needs to be done, but very pessimistic QE will have any significant effect.
  • 1:10 Risk it could encourage speculative bubbles.
  • 1:40 Unemployment is going to keep wages down, but the prices to pay for commodities are up.
  • 2:05 QE’s greatest risk is that it’s leading to a fragmentation in global financial markets. It is leading to global animosity towards the U.S., as the U.S. conducts 21st century beggar thy neighbour policies.
  • 2:30 What we need, instead of QE, is more fiscal stimulus. I think the stimulus package worked; it did stimulate the economy, without it unemployment goes higher. Bernanke and the Obama Administration thought the downturn wouldn’t be as bad.
  • 3:40 Infrastructure would be part of it. But it needs to be designed better. We need to do projects that are harder, that involve more planning. Not shovel ready.
  • 4:20 Because of unemployment with young people, we’re losing our human capital.  We need to keep spending on education.
  • 5:00 One of the reasons unemployment is so high is states are cutting jobs. We have to maintain our education system and research.
  • 6:05 With QE, there is a broad consensus with everyone beyond those in policy-making circles.
  • 6:38 The Fed thought that lowering interest rates would lead to a boom in investment, all it did was create a housing bubble. That’s exactly what they’re trying to do again.
  • 7:20 The Fed has to feel like it’s relevant, agrees with David Einhorn. In some cases, doing nothing is better than doing the wrong thing.
  • 9:00 Long-run goal is to create a society with more equality from the start (education should be the primary focus).
  • 9:45 We need to think how we restructure current spending, and can create more stimulus.
  • 10:10 The money we’re spending on foreign contractors in Afghanistan is not expanding the U.S. economy. If we shift that sort of spending.
  • 10:40 Government will pay back its debts because it owns the printing presses. (Einhorn with a dollar a wallpaper joke).
  • 11:10 We could, if we’re not careful, end up in the worst of all possible situations. High unemployment, wages down, commodity prices up, and American workers being squeezed.


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