The Way Forward: Moving from the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness

44 Pages Posted: 19 Jan 2012 Last revised: 3 Apr 2013

Robert C. Hockett

Cornell University - Law School

Daniel Alpert

Westwood Capital, LLC

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 17, 2012

Abstract

We argue that the U.S. economy is presently mired in a particularly tenacious, Fisher-style debt-deflation rooted in long term secular trends in the domestic and global economies. Global productive capacity has steadily outpaced global absorptive capacity for several decades now, and the latter will not catch up with the former for a good many years to come -- if ever. In order to avert long-term Japanese-style stagnation at home and quite possibly slowdown and slump worldwide, the U.S. will have both (a) to eliminate private sector debt-overhang from 'both sides' of the same, and (b) to act in concert with other nations to reverse and eliminate persistent trade imbalances once and for all. We accordingly describe and prescribe a detailed economic recovery program comprising three 'pillars.' The first is a robust public infrastructure investment plan to compensate for retrenchment-rooted lags in consumer demand. The second is a comprehensive mortgage debt restructuring plan including bridge loan assistance, principal reduction, and 'rent to own' components for mortgage debtors facing three distinct kinds of distress. The third includes medium and long term fiscal and currency policy reforms designed first to recycle trade surpluses into demand stimulus where presently needed, and ultimately to prevent any recurrence in future of imbalances such as have characterized global trade over the past several decades.

Keywords: Debt, deflation, slump, unemployment, recovery, stimulus, growth, infrastructure, mortgage markets, debt restructuring, global imbalances, currency reform

Suggested Citation

Hockett, Robert C. and Alpert, Daniel and Roubini, Nouriel, The Way Forward: Moving from the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness (January 17, 2012). New America Foundation (2011); Cornell Legal Studies Research Paper No. 12-01. Available at SSRN: https://ssrn.com/abstract=1987139 or http://dx.doi.org/10.2139/ssrn.1987139

Robert C. Hockett (Contact Author)

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Daniel Alpert

Westwood Capital, LLC ( email )

489 5th Ave # 33
New York, NY 10017
United States

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0886 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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