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America Needs More Expansionary Monetary Policy

by Joseph E. Gagnon, Peterson Institute for International Economics

Statement before the US House of Representatives Committee on Financial Services' Subcommittee on Monetary Policy and Trade hearing entitled, "Near-Zero Rate, Near-Zero Effect? Is 'Unconventional' Monetary Policy Really Working?"
March 5, 2013

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Why Is This Recovery So Slow?

There are four major forces preventing a rapid return of the US economy to its full potential: (1) Households have increased their rate of saving to make up for losses in the value of their houses and to prepare for retirement; (2) banks continue to apply tighter-than-normal standards and terms on loans to households and businesses; (3) foreign governments continue to send record levels of capital into US markets in order to prevent their currencies from appreciating and thus perpetuating a large US trade deficit; and (4) state and local governments, constrained by balanced budget rules, cut spending and raised taxes during and immediately after the recession. Although the last of these forces appears to have run its course, tax increases and spending cuts at the federal level are now taking over as a major factor retarding growth this year.


Policy Brief 13-21: Lehman Died, Bagehot Lives: Why Did the Fed and Treasury Let a Major Wall Street Bank Fail? September 2013

Op-ed: Misconceptions About Fed's Bond Buying September 2, 2013

Op-ed: After Bernanke, Make Unconventional Policy the Norm July 15, 2013

Testimony: The Fed at 100: Can Monetary Policy Close the Growth Gap and Promote a Sound Dollar? April 18, 2013

Op-ed: How the IMF Can Help Cut US Joblessness February 4, 2013

Policy Brief 12-25: Currency Manipulation, the US Economy, and the Global Economic Order December 2012

Policy Brief 12-15: Restoring Fiscal Equilibrium in the United States June 2012

Book: The Global Outlook for Government Debt over the Next 25 Years: Implications for the Economy and Public Policy June 2011

Book: The Long-Term International Economic Position of the United States April 2009

Article: The Dollar and the Deficits: How Washington Can Prevent the Next Crisis November 2009

Speech: Rescuing and Rebuilding the US Economy: A Progress Report July 17, 2009

Book: US Pension Reform: Lessons from Other Countries February 2009

Testimony: The Dollar and the US Economy July 24, 2008

Testimony: Why Deficits Matter: The International Dimension January 23, 2007

Book: Accountability and Oversight of US Exchange Rate Policy June 2008

Op-ed: Bubbles Are Getting Blown Out of All Proportion September 8, 2004

Book: The United States as a Debtor Nation September 2005