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Class Year

2009

Document Type

Article

Abstract

This paper presents a comprehensive plan to fix the ailing American economy, through a five-step approach. First, the Federal Reserve must continue to broaden the scope of monetary policy, by purchasing and selling long-term securities. Manipulating expectations through FOMC statements is another tool at the Federal Reserve’s disposal. Secondly, the government must enact fiscal stimulus to stabilize the economy in the short and medium runs, through investment in infrastructure projects, green technology, fusion technology, and science education. Additionally, the new fiscal policy must tackle the mortgage meltdown, which is weighing down the entire economy. Third, the regulatory system must be changed to reduce the likelihood of another financial collapse, starting with the nationalization of the ratings agencies. Ratings should be updated faster, with a numeric grading system rather than the pre-existing letter grades. Fourth, our globalized economy insures that a coordinated globalized response is necessary to recover. Global cooperation to reduce inflation and avoid protectionist policies is vital. Finally, the American bailout policy must be made clear, only giving bailouts to companies that are sound but financially strapped and those that are too big to fail.

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