Central Bankers: Stop Dithering. Do Something.考試網(wǎng)(www．Examw。com)

Both the American economy and the global economy are facing a familiar foe: policy defeatism. Throughout modern economic history, whether in Western Europe in the 1920s. in the United States in the 1930s, or in Japan in the 1990s, every major financial crisis has been followed by premature abandonment - if not reversal - of the stimulus policies that are necessary for sustained recovery. Sadly: the world appears to be repeating this mistake.

The right thing to do right now is for the Federal Reserve and the European Central Bank to engage in further monetary stimulus. Having lowered short-term interest rates, they should buy (or in the case of the Fed, resume buying) significant quantities of government securities to help push down long-term interest rates and encourage investment.

As many have observed. we need to rebalance the economy from imports to exports, from private consumption to savings, from tax breaks to infrastructure rebuilding and from the financial sector to everything else. The process of rebalancing will require movement of capital from older industries and activities to newer ones -that is, investment. Moreover, a lot of what was termed "investment" during the boom years was misallocated - wasted - capital. so many productive projects were ignored.

But investment has been held back because of uncertainty over the economy's future prospects. And the ability to attract investors is being limited by the giant burden of private-sector debt, In other words, a financing problem is inhibiting the restructuring of our economy. Alleviating generalized financing problems and low
investor confidence is precisely what monetary stimulus does.

Some claim that monetary easing will impede restructuring. But this makes no sense. For all the talk that monetary austerity promotes the "creative destruction" necessary for the economy to recover. it does not work that way.