Federal Reserve Governor Kevin Warsh spoke yesterday at the Atlanta Rotary Club. Some highlights: "Excessive growth in government spending is not the economy's salvation, but a principal foe....Turning private-sector liabilities into public-sector obligations may effectively buy time, but it alone buys neither stability nor prosperity over the horizon." More:
The most recent round of turmoil in financial markets caused many fiscal authorities around the world to reconsider whether they can spend their way to prosperity. Some are concluding that fiscal consolidation may be the better path to economic expansion. That spending cuts are key to establishing a credible path of fiscal sustainability. That channeling government funds from higher-yielding private-sector activities to lower-yielding public-sector activities undermines economic potential. That fine-tuning aggregate demand requires a precision that is difficult for governments to execute effectively. And, that market forces are often more certain than promised fiscal spending multipliers.
He also makes reference to "The Fed's balance sheet of $2.3 trillion--of which $1.6 trillion represents long-term Treasury securities, agency mortgage-backed securities, and agency debt acquired since late 2008."
Link via Economic Policies for the 21st Century.