Stiglitz critical of Fed QE policy, suggests cooperation to avoid another bubble

There continues to be a lack of seriousness in Washington about the economy. It’s also a mystery why this administration prefers listening to the likes of Summers and Geithner over people such as Joseph Stiglitz and Paul Krugman. Caution and staying the course with the same people who led us into this economy isn’t what most would consider “change.” Then again, even the White House stopped talking about “change” long ago.

Much like other recent administrations, the plan is to kick the can down the road a bit more and hope that the problem is pushed out to the next administration. Rinse, repeat.

A harsh critic of the finance-industry rescue package under the Bush and Obama administrations, Stiglitz said it was entirely reasonable for the Federal Reserve to do what it can to stimulate the U.S. economy after the bursting of the property bubble – “particularly since they caused the problem.”

After the tech bubble burst, the low interest rates designed to alleviate that recession led to the property bubble. And today’s low interest rates will surely cause another bubble, he cautioned.

“I’m not sure where or what, but it’s probably going to be in emerging markets, and not going to be good for the world,” he said. “There is a real risk this is going to end badly, as the two previous bubbles ended badly.”

Only global cooperation, and a new standard for a global currency that moves away from the U.S. dollar, will help the world move away from a constant cycle of boom and bust, Stiglitz said.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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