By James Saft
LONDON (Reuters) – President-elect Barack Obama will have to confront the same intractable economic problems with the same inadequate tools.
The banking system remains impaired and will require more taxpayer support. The impact of one percent official interest rates will still be blunted by the congestive failure of banking. There also isn’t much more in interest rate to cut before the United States looks rather, well, Japanese.
House prices are still falling and will continue to wear away at banking solvency.
Stimulative spending by the government will help, but it too can only do so much. Consumers are likely to use a fair part of any new government checks to pay down debt and save for coming difficulties, rather than rushing out to spend. Infrastructure projects, while sorely needed, will take quite a bit of time to get up and running.