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Stiglitz Says Wall St. Is Selling The Emperor's New Clothes

Economist Joe Stiglitz told Bloomberg that Wall Street is hyping up the economy to sell stock: Jan. 7 (Bloomberg) -- Nobel laureate Joseph Stiglitz

Economist Joe Stiglitz told Bloomberg that Wall Street is hyping up the economy to sell stock:

Jan. 7 (Bloomberg) -- Nobel laureate Joseph Stiglitz said investors are “talking up” signs of a global economic recovery in a bid to boost equities.

“Wall Street is talking up the recovery because it would like to sell stocks,” Stiglitz told reporters at a conference in Paris today.

The MSCI World Index of stocks has surged 73 percent since its low of last March even while the economies of advanced nations grow below their potential rates following the worst recession since the Great Depression.

Stocks are rallying because interest rates are low and companies have been cutting costs by reducing payrolls, factors that suggest economies remain weak, said Stiglitz, a professor at Columbia University in New York.

“Whenever rates are low, stock markets are often high,” he said. By contrast, economists are “almost universally pessimistic.”

[...] He recommended a tax be introduced on financial speculation as a way of generating revenue and forcing investors to focus on the longer-term.

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