Filed under: International Markets, Politics, Federal Reserve, Recession, Financial Crisis
Ben Bernanke, chairman of the U.S. Federal Reserve, said on Thursday: "In the short term, I would believe that we should maintain a reasonable degree of fiscal support, stimulus for the economy."
That was yesterday. Today, Friday, Jean Claude Trichet, president of the European Central Bank, in an editorial for the Financial Times, called for public spending cuts and tax increases immediately across the industrialized world. Prolonging the stimulus would have "very limited" effect on growth, he wrote.
Trichet criticized the oversimplified message of fiscal stimulus -- "stimulate, activate, spend" -- given to all industrialized economies.
In Europe, both manufacturing and services output in the eurozone grew faster than expected. The European Commission also said that consumer confidence was at its highest level in July for more than two years.
When it comes to economic policy, it's difficult to plot the perfect path. Bernanke is an avid student of the 1930s depression and vows not to repeat the mistakes of that era. Trichet, on the other hand, is of the conservative European school of economics. He would prefer to err on the side of fiscal conservatism. Bernake would continue to use public money, if needed. He has already used $11.2 trillion of taxpayer money to prop up U.S. bank. The shift of this vast amount of money from taxpayers to the private banking sector is unprecedented in world history. Whether he should continue this policy is open to debate.
Do you believe that Trichet is right to cut spending and raise taxes?
ECB President, Trichet, Says Cut Public Spending and Raise Taxes originally appeared on BloggingStocks on Fri, 23 Jul 2010 10:30:00 EST. Please see our terms for use of feeds.
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European Central Bank - Jean Claude Trichet - Economic - Federal Reserve System - Ben Bernanke