Bank of Israel’s Fischer Sees ‘No Magic Bullet’ for Recovery

What’s your assessment of the state of the global recovery?
Fischer: It looks like we’re in a slightly slower spot right now, partly because of fears about southern Europe and partly because of a relative slowdown in the United States. But the people who add up the numbers, the International Monetary Fund and others, are changing the global forecast by very little.

What are the consequences of this multi-speed recovery?
Fischer: In the beginning everybody was hit negatively. Now there are a lot of countries which are already above their previous peaks. Unfortunately we still have global imbalances to deal with. That was there before. It seemed marginally to go away during the early stages of the recession because the U.S. current account deficit declined sharply. Now it’s coming back. So we still have those adjustments to make.

How about the state of the U.S. recovery. Does it look as bad from the outside as it feels to people on the inside?
Fischer: The record shows that the Fed is the best forecaster and [Fed Chairman Ben Bernanke] said [Friday] that he expected the recovery to resume in 2011. That isn’t a stellar performance, but it’s a reasonable performance. We’re in a period of massive uncertainty, but it’s the most likely outcome.

Should we be satisfied with a resumption of growth in the slightly above-trend range when we have 9.5% unemployment?
Fischer: You can be dissatisfied and not have anything that you can do about it. Measure satisfaction relative to what’s possible. There are no magic bullets.

What are the similarities you see between the U.S. and Japan today and what are the critical differences?
Fischer: The U.S. is so activist. Nobody is going to sit around patiently waiting for things to improve. Things will be tried and something will be worked out. This is a country which, when it has a problem, tends to get to work and try to solve it, typically in a messy way because that’s how politics is. But ultimately I have faith that the U.S. will get its economy moving. And we see in the last few days that Japan, which did well in the early stages of the global recovery, is also actively seeking and apparently planning measures to try to improve its growth.

http://blogs.wsj.com/economics/2010/08/30/qa-bank-of-israels-fischer-sees-no-magic-bullet-for-recovery/