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Former Top US Economic Adviser: A Weaker Dollar is Good for America

 
 
 
 
 
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Frustrated by “the suffering of real families,” President Obama’s former top economic adviser recently called for action: “If I have a complaint about policy these days, it’s that we’re not doing enough,” Christina Romer said in a speech last month at Vanderbilt University. “I think there are tools we have tools we have that we can use, and I think it’s shameful that we’re not using them.”

With unemployment still near 9% and the “real” unemployment rate at 15.7%, “we can’t afford not to do more,” Romer tells me in the accompanying video. “For heaven’s sake with this many people unemployed — think of what it’s doing to government revenues and support payments. If all you’re worried about is the budget deficit, it’s really important” to put people back to work.

In terms of specific policies, Romer recommends a payroll tax holiday for corporations – rather than workers. Because “firms respond to incentives”, making it less expensive would encourage them to do more hiring.

Romer also wants more action from the Fed, which has already taken extraordinary measures to boost the economy and financial markets.

“What I’d like is for the Fed to come at the unemployment problem with the same passion as when the financial system was in such distress,” she says.

It’s a “mistake” for the Fed to end QE2 in June as planned, Romer continues. “The evidence is it’s been very effective. I don’t understand why we’d be dialing back that tool.”

Despite the recent rise in Treasury rates, QE has been effective at lowering long-term rates, she says, citing academic research such as a new report from the NY Fed entitled: Large-Scale Asset Purchases Were Effective at Lowering Borrowing Rates.

Lower rates encourage corporations to make investments and individuals to borrow, “which tends to encourage spending which puts people back to work,” Romer says.

More controversially, Romer lauds QE for helping to weaken the dollar. A weaker dollar makes U.S. goods more competitive overseas, boosting exports and GDP growth, and ultimately hiring. While that’s true, she seems to overlook the impact a weak dollar has on ordinary Americans in terms of falling buying power and punishment for savers and those living on fixed-incomes.

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  • JanB

    US corporations (multinationals) already pay very low or no taxes so what Mrs. Romer suggests would boil down to paying corporations for trying to make more profit in the USA. Of course tax money would be used for such “encouragement payments”.

    Fact is that the multinationals can make higher profits in low-wage countries like China, India, Vietnam etc. no matter “encouragement” bonuses by the US govt. Thanks to the policy of outsourcing, US workers have to compete with people who can earn as little as $0.39 / hour.

    The result of QE2 (= printing money to pay the ever increasing debt) is quite noticeable: inflation which shows best in increasing price for oil, gold, silver, food etc.

    As QE2 just like QE1 fails to create another bubble to simulate “booming economy” again, there can’t be the least doubt of QE3, even if it isn’t announced: Japan, before the nuclear meltdown a buyer of US treasuries, will have to raise capital for rebuilding the damaged part of the country IOW instead of buying US debt paper, will start selling a huge amount of their holding. So the price will go down.

    Increasing interest rates in order to make US debt more attractive is impossible because the debt is excessive so there’s no way to serve the interest on it, other than printing it! Hence inflation will continue to rise. Combined with declining wages in the US, consumer spending can only decline.

    But as consumer spending in the US is good for 70% of GDP,that can only mean, the real US economy will shrink. Of course with creative bookkeeping the GDP can be made to rise but anyone with some analytical skill will see through that.

    Summarized, there’s no way out of this economic quagmire but to run the money press 24/7 and hope that nobody notices :-D

  • John Taurus

    She is an ugly Jew bitch. She is an enemy of America. Our entire Congress and Senate should be put on trial for treason. They have betrayed America for Israel. That makes them spies and foreign agents. The death penalty should be given to all these traitors who are found guilty. It is time to take back America from Israel and to evict all Jews who reside in America an Europe.

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