Asher Edelman: If I were Chairman of the Fed right now I would try to instruct both the President, his advisors, and Congress that monetary easing alone or monetary policy alone, can never revive the economy. And that without fiscal intervention on the part of government we will be a very long time before the consumer is able to revive his needs and a very long time before our budget will in any way become balanced, that the foolishness of constricting a budget at this time in the middle of a recession is politically motivated but absolute absurdity.
When you go to Reaganomics and you try to release money to the rich in the hope that it’ll trickle down to the others, we have proven time and time again, this is nonsense; it doesn’t trickle down anywhere. The man with a million-dollar income who makes another $100,000 is more likely than not not to spend it. And he generally invests it in a secondary investment, not a primary investment. He will create no jobs with it. He will create no consumption with it normally. The man who earns $30,000 a year or right now nothing and has some money added to that will spend the money added to that because he needs to spend the money added to that, and that will create velocity of money in the marketplace, and that will create the beginnings of a recovery. Conceptually, we don’t get it. If inflation is 2 percent but 60 percent of the inflation figure has to do with labor, who of course are shrinking in terms of salaries and income, then inflation is actually 6 percent. If inflation is actually 6 percent, and I think it’s more than that, and, at the same time, growth is 2 percent, we are in a recession. We’re actually shrinking at 4 percent in terms of goods and services circulating in the country.
The idea of the political motivation in terms of balancing the budget now will absolutely kick back at the economy regardless of whether the debt limits are extended or increased, and will drive the economy into the kind of recession or depression that we had in the 1930s. And I think that you should watch very carefully for the possibilities of social unrest in this country unless Washington wakes up. That’s what I would say if you asked me to become head of the Fed or any other financial job in Washington.