Christine Lagarde, managing director of the International Monetary Fund, said U.S. policy makers should create a long-term plan for handling the deficit or they will risk the nation’s position as the world’s economic leader.
Lagarde said that Washington officials have to “consider that the leading role played by the U.S. economy in the world is at stake,” speaking from Davos, Switzerland, in an interview broadcast today on CNBC television.
“Confidence is something that is really fragile, can be eroded gradually, or broken down,” she said in the CNBC interview, explaining that the U.S. is now experiencing a slight decline in confidence that could have long-term effects. “Too much uncertainty or uncertainty for too long will erode confidence.”
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“there is no expiration date on faulty illogical ideas,” when the Fed decides to exit, they will not be able to put the liquidity ‘toothpaste’ back in the tube.
The agreement “may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem,” said Michael A. Peterson, president and COO of the Peterson Foundation.
“The primary goal of any sustainable fiscal policy is to stabilize the debt as a share of the economy and put it on a downward path, and yet our nation is still heading toward debt levels of 200 percent of GDP and beyond,” he said.
“To get to the point where Bernanke would be comfortable letting up, you have to have a good solid string of economic reports that you’re just not going to get” this year, said Eric Green, global head of rates and FX research at TD Securities Inc. in New York & a former New York …
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