Friday, January 21, 2011

Consumer of Last Resort

A recovery study, right clever,
Showed consumers need time to delever;
So, for growth to begin,
Uncle Sam must step in  

And stimulate, right now, or never.   

The Economist's Free Exchange blog cited a recent study by the Federal Reserve Bank of San Francisco: researchers Atif Mian and Amir Sufi showed that residential investment was quicker to recover in counties with low average household debt than in more highly indebted counties. From this, the authors conclude that, with the US consumer generally highly indebted, lower taxes or interest rates would not suffice to stimulate economic growth; government must step in as the consumer of last resort. This space would add that the nation's infrastructure is in sad shape, and its renewal would bring double benefits.

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