Interview
Raghuram Rajan on the U.S. Economy and Financial Regulation
- The economic recovery initiated in mid-2009 is projected to remain slow and unexciting regarding job growth for the foreseeable future.
- Continued European economic stagnation may cause minor U.S. export losses, but is not expected to trigger a U.S. double-dip recession.
- Long-term measures to address fundamental fault lines, specifically education reform and infrastructure investment, are identified as necessary for future payoffs.
- Increasing political polarization risks alienating disadvantaged groups, potentially leading to punitive measures against the wealthy that hinder economic growth.
- Failure to expand growth participation for lower-income populations is predicted to exacerbate societal polarization.
- The financial regulation bill remains a work in progress with unfleshed elements creating uncertainty regarding its practical operation.
- The current regulatory framework does not address the central housing crisis, raising uncertainty about the feasibility of government withdrawal from the market without private sector relapse.
- Fixing the financial sector without resolving broader political and macroeconomic problems could result in a future crisis of a different form rather than a recurrence of the subprime issue.