US rate cuts won't cure crisis, warns Stiglitz
March 20, 2008
The US was facing the worst financial crisis in almost 80 years and interest rate cuts would do little to help, Nobel prize winning economist Joseph Stiglitz said yesterday.
"This is clearly the worst financial problem we've had since the Great Depression," Stiglitz told Radio New Zealand from Auckland. "That has to have very major ramifications for the American economy and the global economy."
The Federal Reserve cut its main lending rate by 0.75 percentage point to 2.25 percent on Tuesday, a move that "will do a little bit to stem the blood".
Stiglitz said: "The problems are very deep. It's not addressing the fundamental problems underlying the collapse of the financial sector. It's just trying to ease the economy down."
Stiglitz, a former chief economist at the World Bank, expected more Americans would default on home loans as house prices fall, adding to pressure on banks.
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