Lorenzo Bini Smagi, former Member of the Executive Board of the European Central Bank, nails it,
You call it austerity, i would call it putting your house in order. You can’t grow especially if you have a deficit which is so high if you spend more than you earn at the government level. You cannot grow and the markets have understood this. So you have to make these adjustments and it will take time. The problem is that markets are impatient…
The American markets just don’t understand it quite yet, that “…you can’t grow especially if you have a deficit which is so high” — and as the Congress and Administration dither they’ll be craving the Fed crack as soon as Operation Twist ends next month.
Furthermore, the Fed’s zero interest rate policy and quanto easing has reduced the the Congress and Administration’s incentive to take decisive action to address the country’s structural deficit and debt problem. At some point, the markets will.
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