Adam Posen co-authored a book on inflation with Ben Bernanke, and is in Texas to speak to World Affairs Council audiences in Houston and San Antonio. He says people are rightly concerned that their 401(k) funds have lost value.
“I think there is going to be an increasing move in this country in the new Congress–whoever’s the president–to try to put some more backstops in there for people. You know, we’ve swung the pendulum too far, making people assume too much of their own risk. And there are ways to balance that, without going all the way back to forcing people to stay in one job forever.”
World leaders plan an economic summit in November, and Posen says there could be some accomplishments.
“They’ll try to eliminate the exchange rate spillovers so we don’t see quite as much volatility. I think we’ll probably get an agreement in priniciple on some very technical things that are very important. The big one will be that banks should have a liquidity requirement as well as a capital requirement. Without going into too much detail, basically it means that they not only have to have enough securities to back their deposits, they got to have enough cash on hand.”
Posen says there’s a cascading effect of the credit crisis on foreign economies, and people are more interested in the markets of other countries than in the past.
Ed Mayberry, KUHF Houston Public Radio News.