Dr. Doom and the Doomsday Scenario
Banks are “sitting on” $1 trillion of excess reserves and cutting the interest rate on excess reserves to zero from 25 basis points isn’t going to make them lend money, Roubini said. Additional quantitative easing through purchases of securities also won’t jumpstart economic growth, he said.
“The point is monetary policy is becoming ineffective,” Roubini said.
The U.S. economy grew at a 1.6 percent annual rate in the second quarter, less than previously calculated, as companies reined in inventories and the trade deficit widened, figures from the Commerce Department in Washington showed today.