Recovery of U.S. economy takes years rather than months, says economist   2010-09-03 03:08:18 FeedbackPrintRSS

by Zhang Baoping, Zhao Jing

CHICAGO, Sept. 2 (Xinhua) -- The U.S. government has taken necessary actions on both monetary policy and fiscal sides to prevent U.S. economy from collapsing during the financial crisis, but the recovery will take years rather than months, said a U.S. economist in a recent interview with Xinhua in Chicago.

Randall Kroszner, a Norman R. Bobins Professor of Economics at the University of Chicago Booth School of Business, served as a Governor of the Federal Reserve System from March 2006 until January 2009. During his time as a member of the Federal Reserve Board, he chaired the committee on Supervision and Regulation of Banking Institutions and the committee on Consumer and Community Affairs.

Analyzing the causes of the U.S. financial crisis right before its second anniversary in September, Kroszner said: "There are many causes for the financial crisis, one of the important factors really relates to the amount of leverage that was in the system."

He further explained: "Many firms had a lot of debts and they grow very large from buying lots of assets and were only financed with very short term instruments. When people lost confidence in the value of certain types of assets, particularly in the mortgage assets, they pulled back the financing. So you have the cycle of selling assets and pulling back financing which caused it to spiral down further and further and further ..."

Asked what the U.S. government has done during the financial crisis in the past years, Kroszner said: "The U.S. government had done a lot on both the fiscal side and monetary policy side."

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Editor: Mu Xuequan
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