Wikinvest Wire

Feldstein on the possibility of a double-dip

Tuesday, March 23, 2010

Martin Feldstein talks to Bloomberg News about, among many other things, the possibility for a double-dip recession in the U.S., an event that he believes is a "significant risk".

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It's a familiar story of higher savings by consumers whose balance sheets have been decimated by multiple bursting asset bubbles, all of which is leading to lower aggregate demand over the long-term and President Barack Obama apparently isn't helping:
This (healthcare) has been his one issue. It's almost as if he didn't know we had a deep recession. He would say, 'My number one concern is jobs', but then he would immediately turn to see what he could do to increase votes for the health care legilation.
On the Greek debt crisis he thinks they're headed for a "polite default", meaning that, instead of paying off holders of maturing bonds with euros, they'll just give them new bonds.

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Anonymous said...

The problem is that academic economists like Marty want all demand to expand via credit. They want US consumers to borrow to buy not just domestic products, but all surplus products being produced overseas. This is not sustainable, especially when domestic consumers already have more debt than they can service.

Let CPI prices fall, and consumers can buy the stuff they produce without going into too much debt.

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