Tags: Stiglitz | great | malaise | 2014

Economist Joseph Stiglitz: Great Malaise Will Continue Into 2014

Monday, 30 Dec 2013 03:20 PM

By Dan Weil

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The global economic picture wasn't a pretty one in 2013, and it will remain that way next year, says Nobel laureate economist Joseph Stiglitz.

"There’s something dismal about writing year-end roundups in the half-decade since the eruption of the 2008 global financial crisis," the Columbia University professor writes on Livemint.

"Yes, we avoided a Great Depression II, but only to emerge into a Great Malaise, with barely increasing incomes for a large proportion of citizens in advanced economies. We can expect more of the same in 2014."

Editor's Note: Govt Prohibited From Helping Seniors (Shocking)

In the United States, we suffer from higher income inequality than in any other advanced country, Stiglitz says. And that inequality has come with severe political polarization, he notes.

The former Clinton administration official blames Republicans for the political mess.

"One can only hope that the lunatics in the Republican Party who forced a government shutdown and pushed the country to the brink of default will decide against a repeat performance," he says.

"But even if they do, the likely contraction from the next round of austerity, which already cost 1-2 percentage points of gross domestic product (GDP) growth in 2013, means that growth will remain anemic, barely strong enough to generate jobs for new entrants into the labor force."

Strength in the technology and energy sectors won't be enough to offset the impact of fiscal austerity, Stiglitz says.

That means the Federal Reserve will have to keep short-term interest rates at record lows until at least 2015, even though it may further taper quantitative easing (QE), Stiglitz says.

"Ending low interest rates now would not be sensible, though QE has probably benefited the U.S. economy only slightly, and may have raised risks abroad," he says.

As for Europe, "the real danger is that a sense of complacency may set in," Stiglitz says. "As the year passed, one could feel the pace of vital institutional reforms in the eurozone slowing. For example, the monetary union needs a real banking union."

Europe unfortunately appears ready to re-commit itself to the austerity policies that generated a double-dip recession in the first place, Stiglitz says.

"There is still a significant risk of another crisis in yet another eurozone country, if not next year, in the not-too-distant future," he writes.

Nariman Behravesh, chief economist of IHS Global Insight, doesn't share the bearishness toward the U.S. economy or some of those overseas.

"As we go through 2014, the revisions to numbers that are released will probably continue to go up. And we will be surprised even when new numbers come out as to how strong they are," he told NPR.

Editor's Note: Govt Prohibited From Helping Seniors (Shocking)

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