Economic journal - Essay Example

Inability of Nations, Consumers to Get Out of Hock Weighs on Global Economy” Tom Lauricellas article, the Inability of Nations, Consumers to Get Out of Hock Weighs on Global Economy, is a critique on the current federal policies that seeks to help Americans cut their debts. The fundamental argument is that stimulus or simply pumping money into the financial system, which is the main strategy adopted by the Federal Reserve, is not enough to improve the worsening debt situation in the country.

There are so many reasons why I agree with Lauricellas point of view. First, the statistics, as outlined in his article are grim evidences that, indeed, the debt situation in America is getting worse amidst the series of Federal Reserve measures aimed at addressing the problem. For example, there is the quantitative easing wherein the Fed purchased more than trillion-dollar mortgaged-backed securities back in 2008. A second quantitative easing measure is set to end this year but there appears to be very insignificant impact on the credit market.

In addition, a very important issue raised by Lauricella is that the low cost of borrowing has been taken for granted by Americans who are failing to address their debt problems because the existing system is quite lax and permissive. The author is highly critical of this attitude, referring to the so-called period of "Great Moderation" during the late 1980s and 1990s when the economy was resilient because of restrictions and safeguards in the credit market. This point makes a lot of sense because, unarguably, the debt crisis that is happening in America today has much to do with the public’s attitude on debt.

More and more people are allowed to incur debt even if they no longer have the capacity to pay for them. The 2008 financial crisis underscored this and the government should have taken measures to address this dimension. The stimulus packages can only do so much. What is worse is that it could even contribute in worsening the situation because consumers will only be emboldened to have more credit or continue their attitude towards this problem, because the government is always there to back them up.

The way Lauricella approached the problem and interpreted the information available is quite comprehensive and authoritative. His analysis, however, remained merely as such because he did not bother to explore in detail how such problem can be addressed. He did go nostalgic about the “Great Moderation” of the past, but what exact measure or aspect of it should be adopted or applicable today? He should have discussed more how the public’s attitude could be changed. Works Cited Lauricell, Tom.

"Debt Hamstrings Recovery - Inability of Nations, Consumers to Get Out of Hock Weighs on Global Economy," Wall Street Journal 27 June 2011. A1. Print.