Economist Joe Stiglitz warned back in 2010 that the world risked sliding into a 'Great Malaise.' This week, he followed up on that grim prediction, saying, 'We didn't do what was needed, and we have ended up precisely where I feared we would.'
The problems we face now, Stiglitz points out, include 'a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity.'
He says the only cure is an increase in aggregate demand, far-reaching redistribution of income and deep reform of our financial system. The obstacles to this cure, he writes, 'are not rooted in economics, but in politics and ideology.'"
"What we need now is 1) debt relief to unwind the overhang and 2) much tighter financial regulation to prevent the growth of new fragilities. And if those prove inconsistent with full recovery, then we need massive government spending on infrastructure and other investments financed by money printing until full employment is reattained."