The economy of the US has not yet returned to its previous level of growth before the global financial crisis in 2008, which indicates the US government will suffer from greater deficits than it previously estimated, a visiting Nobel laureate in economics said yesterday in Taipei.
Thomas Sargent, who won the Nobel Prize in Economics in 2011, said there was no consensus among economists on why the US has not returned to its previous level of growth, as it did after other economic crises.
However, some have argued that when a crisis hits the financial sector, it takes longer for a country to recover, Sargent said.
The 69-year-old economist was awarded the Nobel prize with Christopher Sims for their empirical research on cause and effect in the macroeconomy.
He is a professor of economics at New York University and a senior fellow at Stanford University’s Hoover Institution who specializes in macroeconomics, monetary economics and time series econometrics.
NO EASY SOLUTION
At yesterday’s forum, Sargent said there was no solution to the European debt crisis that would make everyone better off, because all the possible solutions involve moving resources from one group of people to another.
Based on his observation of the recent election in Italy, Sargent said it is evident that there is resistance from voters against rules imposed by other European countries for bailing out the country.
The development and status of the lingering European debt crisis is “ambiguous,” due to the fact that there are different interests among the various nations in that region, he said.
European governments are facing dilemmas, such as whether to pay off their debts and whether the comparatively richer governments should offer bailouts to those in debt, Sargent said.
Although fiscal crises sometimes spark political revolutions, it is hard to predict how revolutions would surface in Europe because there are huge disagreements and different interests among the European democracies, he said.
Despite such “ambiguity,” Sargent said, there is still hope of a resolution of the issues.
“Problems tend to be solved only after they become crises,” he added.