US Austerity Impacts

A week late in my noting but Nouriel Roubini has put up a great summary of how fiscal cliff/sequestration is effecting economic growth in the U.S.

In his discussion The Trapdoors at the Fed’s Exit, he points out “The effects of fiscal austerity – a sharp rise in taxes and a sharp fall in government spending since the beginning of the year – are undermining economic performance even more.”

Some great discussion of the difficulties policymakers will have in tightening interest rates when that time comes in maintaining both economic growth as well as financial stability. It will take more than interest rates alone to achieve.

While discussing how carefully the course needs to be navigated he is quick to make the point this is not yet the time to begin constraining liquidity. I agree.

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