The United States is sliding towards a dangerous 1930s-style "liquidity trap" that cannot easily be stopped by drastic cuts in interest rates, Nobel economist Joseph Stiglitz has warned.
"The mechanism of monetary policy is ineffective in these circumstances. I'm not saying it won't work at all: it will help the banking system but the credit squeeze is going to go on because nobody trusts anybody else. The Fed is pushing on a string," he said.
The grim comments came as markets continued to suffer wild gyrations, reacting to every sign of contagion spreading to Europe, Asia, and emerging markets....