"Policy makers around the world marched ahead Wednesday with efforts to stimulate a withering global economy that so far has overwhelmed their attempts to contain the damage. Central banks in Norway, the Czech Republic, Hong Kong, Saudi Arabia, Oman and Kuwait cut interest rates, a day after the Federal Reserve slashed its rates and promised more unconventional lending to battle the deepening U.S. downturn. Additional interest-rate reductions are becoming more likely in places such as Japan, the U.K. and the euro zone. ... As rescue efforts mount, economists are struggling to explain why nothing so far has worked to avert a deep recession", my emphasis, JH at the WSJ, 18 December 2008.
"It is now frighteningly clear that the world's dramatic financial rescue efforts are both unprecedented in scope and creativity--and wholly inadequate. ... The needed response is a big-bang global bailout that is even bigger than what we have seen so far, one that is large and sweeping enough to restore confidence. ... Clearly, the governments have not succeeded in restoring calm. Their efforts look improvised, confused and ineffective to the average consumer or investor. The risks are too great not to move more boldly. ... The U.S. stimulus package would have to be big enough to allay any doubts that the United States is not going to risk failure--a trillion dollars (about 7 percent of GDP) over two years is the right order of magnitude, not $500 billion over the next two years, if press reports of Obama's plans are accurate. ... Unfortunately, there is no way to finance a massive stimulus without going into deeper deficit and incurring extraordinary level of debt. ... The United States cannot act alone. ... Uncertainty is the enemy of stability and growth. Governments are, like it or not, in charge", my emphasis, Jeffrey Garten (JG) at Newsweek, 22 December 2008.
I would like JH's reporting to show more skepticism. "Specific actions were ... less important than [FDR's] willingness to be aggressive and to experiment". "I call it the Great Experiment", indeed. What objectives does the Fed hold "sacrosanct"? "Open to political intrusion"? The Fed is a creature of Congress. What else is it? "Could expose the central bank to losses"? Huh? The Fed bought or lent on paper no one else wanted! This article is pitiful.
In the real economy, things take time. Perhaps the world needs higher interest rates.
JG is a Yale School of Management professor. Professors love power. JG likes bold action and inflation. Own bonds? Euros, US dollars, Yen, etc., sell them! Worldwide inflation is coming. JG does not want the US to "risk failure", whatever that means. He'd rather the dollar fail. Did JG find his trillion dollar number in a hermetically sealed mayonnaise jar? How does he know it will "work"? Compare JG's comments to those of Robert Higgs at: http://skepticaltexascpa.blogspot.com/2008/12/policy-instability.html.