US Economy Needs Second Stimulus: Wilbur Ross
The US economy needs another cash infusion to take off, as the first stimulus package was insufficient to help the US consumer start spending, and longer-term it needs to devalue the dollar, investor Wilbur Ross told CNBC Tuesday.
President Barack Obama's efforts to kick-start the economy by programs such as cash for clunkers need to be followed by "more dramatic" efforts, Ross told "Squawk Box."
"The consumer is about 70 percent of the economy and is still disabled. The consumer can't borrow… and I believe that Obama will have to go for another stimulus package, probably in the spring, because I don't think unemployment is going to get that much better by then," he said.
The dollar should probably be devalued because the US is less competitive than other economies and has higher debt, and "some form of SDR" should become the world's reserve currency, according to Ross.
"I think the way out of it, frankly, is going to be the devaluation of the dollar. The tricky question is :where is the strong currency against which we devalue?"
Although earnings were better than expected in the last quarter, companies will continue to face hardship. (Click on the video on the left for more Ross comments)
"I really think that corporate America is doing better than economic America. Mostly it's the flip side of the joblessness. Company earnings I think are going to continue to outperform the economy for a little while," Ross said, but added that consumers are "more leveraged now than at the peak of the boom" because the value of their assets fell.
"I think it's really going to be that we will continue the massive transfer of liabilities from private sector to public sector" and this is how the economy will deleverage, Ross said.
Some analysts and politicians have said that the $787 billion, two-year stimulus package approved in February will take time to work its way through the economy and no more money was needed.
"There will be more spent but I really don't think it's going to solve the consumer problem. Real unemployment is around 12.8 percent because people who've given up looking for a job don't count as unemployed, but they are," Ross explained.
Meanwhile, the government's Public-Private Investment Program, which offers private investors the chance to buy toxic assets, should be expanded, Ross said.
"Unfortunately it (the PPIP program) has become very small. It was mean to be a trillion now unfortunately it won't even be 100 billions of it," he said, adding that for investors this was good because they don't have to find the funds to finance the purchase of assets, but for the government the program does not meet its purpose.
Ross's company Invesco is among the firms the government selected earlier this year to help get toxic assets off the balance sheets of troubled banks and has bid $1 billion in an auction which is closing Wednesday and in which bids are matched 50-50 by TARP money.
"It's very clever in that it gives the government the upside of it and it also gives some downside because we're matching it with private funds," Ross said.
"I hope the PPIP program will work sufficiently well that they'll decide to expand it back," he added.