The chief economist at Nomura Securities’ research arm said Thursday that the U.S. government must keep spending money to boost the economy to avoid the same stagnation Japan suffered in the 1990s.
“We still need more government spending,” said Richard Koo of Nomura Research Institute Ltd, according to Bloomberg. It could take “three to five years to get out of this mess even under the best of circumstances.”
He said that learning from Japan’s experience, fiscal stimulus should not be removed “until private sector de-leveraging is over.”
“When we see the private sector coming to borrow again, I’ll be the loudest person on earth arguing for fiscal reform. That’s the exit.”
Koo says people are not spending even with “zero interest rates” because households do not want to borrow, and are saving and paying off debt.
The 2009 federal deficit is expected to be $1.42 trillion this year, a record, according to Treasury department figures.