I missed this post on The Big Picture yesterday and had to comment.
Monetary policy in general can help with liquidity — reducing the odds of another credit freeze up — but can only do so much to improve Employment situation and GDP. To move the needle with that requires a Fiscal response, one that is unlikely to occur given the dysfunctions of Washington D.C.
Compare this with say the fiscal response to the crisis out of Germany, and what it has meant for their GDP and employment situation, and you will better understand what is possible versus our foolishness.
Comparing the economies of Germany and USA is “apple to oranges”. Not only is Germany an export driven economy, but the USA is 25% of the world’s economy.
During the 2008 crisis, USA asked the EU to join in stimulus and the Germans blocked it. Germany benefited from USA stimulus (export economy) without risking anything. It allowed them to keep full employment and avoid recession while the world’s largest economy pumped up the world’s economy. The Germans are terrified of mass unemployment and have good historical reasons for wanting to maintain full employment. The question is, will this short-term solution actually harm them in the long-run. I think it will.
Have things become so twisted around that “creative destruction” is a “bad word”?
Despite all the rhetoric on the left and the right, I think we will find out that the USA is only ONLY capitalist economy in the world, and has been for a long time.
My point is that you cannot look to Japan, Germany, or China for guidance on how to run the American economy. Geography and history make each country’s policy unique.