On the monetary side, Richard Koo believes that central bank stimulus programs (QE) only have a small effect on economic growth (via interest rate and asset price manipulation) because QE doesn't address the real problem of having a lack of borrowers in the banking system to lend to. He also believes that QE puts economies into a trap because inflation, or the threat of inflation, would force monetary tightening in an already fragile economic environment. He was pro QE1 in the U.S. because it prevented the financial system from collapsing, but he continues to believe that additional QEs aren't doing much for the economy and have just increased inflation and currency risk. Watch Richard Koo's April 2013 INET speech and March 2014 FCCJ speech below (includes charts). He was also on CNBC the other day talking about the "QE trap" (third video).
In the end, Richard Koo believes that fiscal stimulus (government borrowing and spending) is the only way to prevent GDP growth from collapsing after a leveraged asset price bubble bursts, and today he's especially worried about the balance sheet recessions and sovereign debt crises in the Eurozone. It is very interesting how he puts all of the pieces together.
Source: INETeconomics.org (view Richard Koo's charts and read his paper) *starts at 27:55
Source: FCCJ via Youtube
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