© Larry Downing / ReutersA view shows the Federal Reserve building
As stock markets continue their slide into negative territory, economists debate whether the problems lie in monetary mismanagement by the US Federal Reserve or with China's domestic concerns "exporting pain" to others via its yuan devaluation.
Speaking to RT, economist Peter Schiff of Euro Pacific Capital Inc. said that there is a lot of "scapegoating" surrounding China and the yuan's devaluation when it comes to the recent downward fortunes of global stock markets, but that the Federal Reserve is the more responsible culprit when it comes to any instability in the American economy."This is not about China. This problem is made in America.
It's all about the Fed. The Fed inflated this bubble and now they're threatening to prick it. Everybody expects the Fed to actually raise interest rates," Schiff said, after US stocks rallied early Tuesday
before crashing in the final hour of trading.
He went on to say that he believes the possibility of the Fed raising rates is "a bluff," and that doing so would trigger another financial crisis.
"If the Fed takes away the zero percent interest rates, this market is going to implode and we're right back at recession... that is what is hurting markets around the world," Schiff said. "It's the fear of higher interest rates. That's propping up the dollar, that's depressing emerging markets, that's depressing commodity markets."Critics of Schiff's view claim the Fed isn't to blame and that, in fact, the US government has not done enough to help boost the economy.
"The problem is that this has been a very weak recovery for the United States," Mark Weisbrot from the Center for Economic and Policy Research told RT. "Our GDP is about 8.5 percent bigger than it was at the peak before the Great Recession," he said, adding that this statistic represents very little growth.
By comparison, he said, China has grown by 80 percent and Europe has just recently caught up to its pre-recession peak. Specifically, Weisbrot singled out the European economy as the "much worse problem," citing much higher unemployment rates there than in the US.
He said the Fed "has done its part" by keeping interest rates low and that America needs more infrastructure investment and stimulus to create another three or four million jobs.
Schiff, however, was adamant that the US hasn't had "a real recovery."
"The reason that the average American is worse off today than when the recovery began is because the Fed hasn't allowed a recovery," he said, adding that measures such as zero percent interest rates are "interfering" with a true recovery. Instead, less government, higher rates and a "real recession" are needed before recovery can occur, Schiff said.This argument was challenged by Weisbrot, who said that allowing the recession to worsen wouldn't have helped because the kinds of policies Schiff advocated for had been implemented in Europe and did not lead to better economic growth.
Regarding China's role in the market turmoil, economist Max Wolff of Manhattan Venture Partners told RT that the yuan's devaluation is a move that suggests China is still more interested in looking inward than focusing on the global economy.
"When the Chinese go for the devaluation, what they're saying is, 'We're more concerned with our domestic employment and GDP picture, and we're willing to make a good effort to export our pain to other people,'" he said. "What that means is that a leading global economy isn't taking a leadership role; it's really internally focused and it's willing to export some pain in order to stabilize internally."
This could suggest the situation in China may be worse than initially thought, he added. Beijing's move has led other nations to follow suit and devalue their currencies in order to stay competitive, Wolff said, warning that any further devaluation could risk a continuing chain reaction.
At the same time, he noted that there are "real pockets of weakness" in the US economy, particularly since the bottom 75 to 80 percent of households still haven't recovered from the 2008 crisis. "They're not as strong as we'd like them to be going into a tough global moment," Wolff said.
Reader Comments
The problem with blaming it on China is that we have to praise them for the other stuff that we have been praising ourselves for.. all this great 'recovery' that the professional press loves to squawk about... This is the same for any sport, any profession.... be it a sports hero or a president, with the praise and glory goes the blame, shame and ridicule. Trying to separate the two is futile and fruitless, though inevitable and endless.
In closing, one song perhaps sums it up best in these words: 'The party's over... it's time to call it a day..."
Today, Global Research brings to the attention of its readers a selection of analytical articles relating to the global economy.
Around the world, billions of dollars of wealth are seamlessly being moved from one hand to another, from one country to the next.
The global economy is run by powerful economic networks which undermine national sovereignty. These networks are controlled by non-representative neo-conservative “intellectuals” and corporate banking elites.
Below, you will see how such an agenda can lead to sketchy bailouts, rigged financial markets and covert transactions by central bankers. .....continued
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The Fed has itself epoxied/cemented/reinforced bunkered into a corner. It cannot raise interest rates without the Dollar collapsing in a pile of smoldering paper.
The population and the economy cannot recover under such circumstances, and as costs/taxes/etc. go up, the real employment shrinks.
One thing is certain: the situation won't cure itself, and the Fed is clueless and shiftless. It is also not alone, for Leadership is out to lunch and just as worthless, having no wisdom.
They are far from clueless - they are (and have been) crashing the economy on purpose, for their (the private owners of the Fed) own profit.
the bottom 75 to 80 % . Surely we don't need double speak here. Tho I will agree we have not had a real recovery.
elderly, social security, likes heat at 72 with low humidity, it seems that the US has handled this as an opportunity to cut more jobs and robotize the assembly line. We bailed the car companies out and there should have been a commitment to jobs, not an opportunity to downsize the labor force. We arent selling cars, were doing leases for the extremely well qualified. We arent selling houses, we are dragging out foreclosures until the cows come home. This is the face of austerity, folks, no matter what they call it.
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