Stephen Roach: QE1 Didn’t Work, QE2 Won’t Work, And QE 12 Won’t Work Either
Oct. 13, 2010
Stephen Roach of Morgan Stanley spoke to CNBC this week about quantitative easing (via Pragmatic Capitalist).
0:25 Global imbalances are a shared responsibility, this cannot be blamed on just China or the U.S.
0:45 The currency fix won’t work, the U.S. is caught up in political problems driving its decision-making.
0:55 This U.S. has bilateral trade deficits with 90 countries. China is only one.
1:15 If we close down trade with China, the problem goes somewhere else. The U.S. needs to deal with its saving problem.
1:40 The world needs to get together and fix its savings problem. The currency tool is not necessarily the way to deal with this. The U.S. does not save enough, China does not spend enough. The world should be working together to solve this, not putting undue pressure on China.
2:30 There is a lot of hot money going around and a lot more to come from the next round of QE. All of that excess liquidity is going to flow into high yielding Asia. Never in favor of capital controls, but may have to be used.
3:30 “It’s not gonna work. QE1 didn’t work, QE2 didn’t work, QE 12 will not work. When you have an economy that is deleveraging and you throw liquidity at it do you think American families are just gonna so oh, we’ve got a lot of money, lets just go back into debt again or lets squander our savings?”
3:50 American families are in shock from the recession, they are rebuilding their balance sheets as they head for retirement. You can’t defer this.