Stiglitz -v- Goldman Sachs Chief Economist

Stiglitz Says Markets ‘Irrationally Exuberant’ About Economy
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http://www.bloomberg.com/apps/news?pid=20601087&sid=aExyOK3McV8E

By Jeremy Torobin

Oct. 5 (Bloomberg) -- Nobel Prize-winning economist Joseph Stiglitz said unemployment is going to keep rising and should be the main focus for policy makers, and that gains in the stock market indicate investors have been “irrationally exuberant” about a recovery.

“There’s a lot of risk going ahead of some big bumps,” he said today in a Bloomberg Television interview from Istanbul, citing housing, commercial real estate and consumers’ inability to pay off credit cards because of job losses. “There’s a very big risk that markets have been irrationally exuberant.”

The likelihood that the U.S. economy will be “out of the woods” before most of the measures in the Obama administration’s stimulus package expire in 2011 is “very small,” he also said.

In a separate Bloomberg Television interview today, Goldman Sachs Group Inc. Chief Economist Jim O’Neill said the International Monetary Fund meetings in Istanbul are “stuck” in an outdated mentality that doesn’t reflect the rising power of emerging economies following the global financial crisis.

O’Neill also said the dollar probably isn’t the No. 1 concern for U.S. policy makers, and predicted 4.1 percent growth for the global economy next year.

Many countries will be “surprising” in their economic growth in 2010, he said, while adding that there is a potential for more “positive surprises” that could help fuel global expansion.

To contact the reporter on this story: Jeremy Torobin in Washington at jtorobin1@bloomberg.net
Last Updated: October 5, 2009 12:00 EDT