Wednesday, June 5, 2013

Why America Owes A Lot To Ben Bernanke And The Fed

The Fed has been criticized for its use of monetary easing to prevent the collapse of the US credit system and the dangers from deflation.  Martin Wolf argues that the US owes a big debt to Ben Bernanke and the Fed.  Without the Fed's help, and that of other central banks, we might have had another global depression.  The US economy going forward faces a headwind from US fiscal policy which is contractionary.  Moreover, there are other structural problems in the US economy that will limit growth.  The economy is being held up by consumers who have stopped running surpluses.  Businesses are still running large surpluses and the US continues to run large current account deficits.  It is unlikely that the US will run current account surpluses.  Therefore, the growth of the US economy is dependent upon an increase in business investment that has been slow to develop. 

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