Saturday, September 15, 2012

Nouriel Roubini on ECB Decision & Fed's QE3

In the eurozone, euphoria followed the ECB’s decision to provide support with potentially unlimited purchases of distressed countries’ bonds. But the move is not a game changer; it only buys time for policymakers to implement the tough measures needed to resolve the crisis. And the policy challenges are daunting: the eurozone’s recession is deepening as front-loaded fiscal consolidation and severe credit rationing continues...

In the United States, the latest economic data – including a weak labour market – confirm that growth is anemic, with output in the second half of 2012 unlikely to be significantly stronger than the 1.6 percent annual gain recorded in January-June.

And, given America’s political polarization and policy gridlock, we can expect more fights on the budget and the debt ceiling, another rating downgrade, and no agreement on a path toward medium-term fiscal consolidation and sustainability – regardless of whether President Barack Obama is re-elected in November.
...
Ineffective governments with weak leadership are at the root of the problem. In democracies, repeated elections lead to short-term policy choices...

But, as everyone kicks the can down the road, the can is getting heavier and, in the major emerging markets and advanced economies alike, is approaching a brick wall. Policymakers can either crash into that wall, or they can show the leadership and vision needed to dismantle it safely.

Excerpts from Original Source

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