The Riots – Joe Stiglitz makes the Cuts connection as austerity stalks America
The US Federal Reserve today tried a new weapon. A formal preannouncement that ultralow interest rates would stay in place for two years. So why bother meeting? (and it’s something for the Bank of England to chew over). More concerning was the very downbeat assessment of US growth prospects, which have changed dramatically since June, even taking into account the one-off factors such as Japan.
That assessment backed-up what I heard this morning at Joseph Stiglitz’ flat on the Upper East side of Manhattan. He has believed that the US, the UK, the entire North Atlantic faces a Japan-style malaise lasting years, with low employment, and “triple or even quadruple-dips”. He now believes that these prognostications are coming true, partly blaming the Tea Party for the US downgrade, but showing thinly-disguised exasperation at President Obama.
More than that he makes a very strong connection between austerity and cuts. He relays an anecdote about the IMF austerity imposed upon Indonesia that saw riots six months on.
“One needs to say that when you take away hope..” and see prolonged unemployment “for you and your friends, people lose faith in their society… The kinds of draconian cuts [in the UK] are causing many people to lose hope”. When i pointed out that many of the London rioters seemed more like highly consumerist gang members, he insisted that even then it would still be a “sign of economic failure”. Watch the full interview here soon.
Clearly the Stiglitz view is not shared by all in NY by any means. Indeed quite the opposite from one of America’s most famous market commentators: CNBC’s Jim Cramer, who is very excited about UK austerity, and Britain’s place as a safe haven for investment alongside Australia and Canada.