Story by Mitch Waite
“We used to take for granted, that the government should try and improve the economy, and that there were things that it could do,” said Floyd Norris, chief financial correspondent of the New York Times.
Norris gave a lecture addressing the question, “What’s wrong with the American economy?” He offered reasons for the cause of the recent recession, and possible solutions for what can be done to improve the economy.
Norris addressed the current issues with the nation’s economy, and what he believed to be the primary reason for the financial woes of the United States. He mentioned the main reason as to why the economy is in its current poor position. “A lot of the suffering that we are undergoing now, and that is affecting your lives was brought on by people who bought homes that they never should have purchased, and paid more than they could possibly afford,” he said.
Norris further mentioned that as much as there is little sympathy that exists for the people who borrowed. Also, there is great hostility towards the banks that made those loans. As Norris put it, “They reduced the lending standards and in some cases, they helped borrowers lie about their income or assets to qualify.” Citing these reasons, Norris offered solutions that could help in reviving the economy.
One solution that is heavily debated is that of stimulus spending. Through 2008 and 2009 there was a period of stimulus spending that the Federal Reserve implemented. By 2010 it appeared to be working with huge gains, but ultimately, those gains were lost. However, Norris stated, “It seems to me that the analysis is since stimulus didn’t work, we shouldn’t try it. It’s similar to the analysis that a student who studies for a test does poorly and thinks, ‘well there is obviously no point in studying’. There is another conclusion. You could read which is perhaps to do more. To me, that is the answer on stimulus.” Norris said that stimulus could work, but it isn’t the only answer.
Actually, Norris said that inflation could help as well. Though the majority of people feel that inflation is a bad thing, Norris said that “good” economists are lobbying for inflation. In an interview after the presentation, Norris further explained that inflation could help reduce debt burden by counteracting deflation. Simply put, if a person owed $2,000 in the 1940s, it would take maybe a year to pay it off, but today, they could pay it off in a matter of weeks. Norris outlined one other option for combating the poor economy and a way of getting rid of debt.
Norris said he wishes that the practice of mortgage cramdown had been adopted. Last year this would have given judges the ability to reduce what is owed on a loan for those declaring bankruptcy. One attendant to the conference, Brad Toone, mentioned having heard that mortgage cramdown was aggressively fought against due to the belief that it would create even more uncertainty in the value of mortgages.
Individuals who heard the lecture, such as Shandi Beckwith, said she felt that Norris was able to narrow the scope of such a broad subject as the economy in America.