Tom Keene Talks to Alan BlinderBy
What kind of policy is the Fed pursuing right now?
They are making it up as they go along. It looks like the version of quantitative easing that they are about to embark upon is a lot like what the Japanese did between 2002 and 2006 when they bought government bonds.
You have really pushed back against Pimco's "new normal." Do you continue to believe that "new normal" misses the economic path of the U.S.?
The thing I take issue with is the idea that the trend rate of growth of the U.S. has been permanently lowered by these events. I look at productivity in recent quarters—and really in the whole bad period—as having been excellent. That doesn't make me pessimistic at all about our long-run ability to grow GDP and, by the way, jobs.
Would you support a British-style austerity budget for the U.S.?
I do not support it at all. There are a few instances in history where that has worked, but you would not want to bet on it and it is certainly not the norm, especially not for a country like the U.K. or the U.S., which still has its own currency and is able to go to the capital markets to raise funds. You know, there was a kind of a false generalization from the case of the Greeks. If you look at what happened with Greece, they sort of ran out the string. They could not borrow anymore. They could not appreciate their currency. This is not the situation facing us.