“Where is the demand going to come today if it’s not from some form of government action?” asks Google Inc. chairman Eric Schmidt in this Bloomberg story. “The government has big levers that it can apply. But it needs to do it in the short term.”
“The federal government can spend as much money as it wants because we borrow in our own currency,” said Schmidt, who now heads Google's board as CEO Larry Page leads day-to-day operations.
Don't expect China, India, Brazil and other growing countries to save the world economy; they're not going to buy a lot more of our stuff, Schmidt warned: “We already have one of the cheapest currencies we ever had and yet we still cannot export ourselves out of this recession." Yields on 10-year US government notes are below 2%, half the five-year average.
“All of the economists that I know agree that in a situation where there is a strong possibility of a very long- term recession, or at least a structural growth recession, which many people think we’re in, you need to do something now,” Schmidt said.
Without government spending, the private sector won't likely create a lot more new jobs "for a very long time." In recent months modest US private-sector job growth has been nearly cancelled by layoffs, including teachers and other local and state government workers.
“Economic growth comes from the private sector with government assistance,” including grants to states. "The states are restricted to actually having balanced budgets and with revenues going up and down, it’s extraordinary hardship at the state level and that contributes to the economic decline,” Schmidt said. “A simple thing to do would be block grants to the states to help them through this.”