The economic repercussions of a stock market crash depend less on the severity of the crash itself than on the response of economic policymakers, particularly central bankers.
It takes about two and a half percent growth just to keep unemployment stable.
Indeed, in general, healthy investment returns cannot be sustained in a weak economy, and of course it is difficult to save for retirement or other goals without the income from a job.
Education – lifelong education for everyone – from toddlers to workers well advanced in their careers – is indeed an excellent investment for individuals and society as a whole.
It is not the responsibility of the Federal Bank – nor would it be appropriate – to protect lenders and investors from the consequences of their decisions.
Under a cold turkey strategy, at each policy meeting the Federal Open Market Committee would make its best guess about where it ultimately wants the funds rate to be and would move to that rate in a single step.
If you are asking me if I would advocate that the Chinese go to greater flexibility in their exchange rate, I certainly would.
We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.
I think one of the lessons of the Depression – and this is something that Franklin Roosevelt demonstrated – was that when orthodoxy fails, then you need to try new things. And he was very willing to try unorthodox approaches when the orthodox approach had shown that it was not adequate.
I generally leave the details of fiscal programs to the Administration and Congress. That’s really their area of authority and responsibility, and I don’t think it’s appropriate for me to second guess.
The Fed is totally open.
The amount of currency in circulation is not changing. The money supply is not changing in any significant way.
The American people are among the most productive in the world. We have the best technologies. We have great universities. We have entrepreneurs.
It’s true that the Federal Reserve faces a lot of political pressure and is unpopular in many circles.
It’s the price of success: people start to think you’re omnipotent.
In the future, my communications with the public and with the markets will be entirely through regular and formal channels.
The benefit of appointing a hawkish central banker is the increased inflation-fighting credibility that such an appointment brings.
To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.
The more important reason is that the research itself provides an important long-run perspective on the issues that we face on a day-to-day basis.
I think that having good data, good statistics-and the United States generally has better macroeconomic statistics than most countries-and having good economists to interpret those data and present the policy alternatives, has a substantially beneficial effect on policymaking in the United States.