Friday, June 18, 2010

"And it goes back to the fundamental problem that I mentioned in the beginning of failure of alignment between private rewards and social returns. When I was on the Council of Economic Advisors, I saw that not only was the financial sector not innovative, they resisted our innovation. We came up with this idea of having inflation indexed bonds, and it was initially resisted by treasury, resisted by the financial markets. I scratched my head and I asked why. And then we figured out why. People buy these products and hold them to retirement. If you hold them to retirement you don’t make fees, because you don’t have people selling and buying them. And so for the financial sector they were disastrous. For Americans worried about the risk of inflation, they were a fantastic product."

-- Joseph Stiglitz, Roosevelt Institute Round Table, March 6, 2010.

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