IMF wants nations to pass large fiscal stimulus packages

Posted Dec 30th 2008 11:45AM by Joseph Lazzaro
Filed under: Forecasts, Economic Data, Politics, Recession

The unique characteristics of the global recession will require large, but focused, fiscal stimulus packages by nations around the globe, so says a leading international policy and research group.

The International Monetary Fund said the drop in demand requires a substantial fiscal stimulus of at least 2% of world domestic product (WDP), coordinated action, with a focus on spending and targeted tax cuts.

Roughly 2% of WDP would amount to $1.5-1.8 trillion in fiscal stimulus, according to research compiled by economist Peter Dawson.

"Fiscal stimulus by nations may have to be larger than that, given how much the global economy has slowed during the past year," Dawson said. "The IMF forecasts a WDP growth rate of 2.2% in 2009 but it will probably dip below that, which would suggest a need for an even larger fiscal stimulus, probably upwards of $2.0-2.3 trillion for 2009."

The unique factor driving the need for the above? For the first time in the post-World War II era, all major regions of the world -- U.S., E.U., China/Japan -- are in recession at the same time, as are the emerging market economies of India, Brazil, and Russia, Dawson said.

Further, Dawson agreed with the IMF that budget deficits -- something the IMF normally chides governments for -- should not be the focus now. "In normal times, they would be, but these are not normal times, as the IMF takes pains to point out," Dawson said. "We have to do what's needed to increase demand in 2009 and 2010."

Economic Analysis: The IMF also argued against troubled-industry rescues, such as the U.S. auto sector rescue, and against general as opposed to targeted tax cuts, stating that they'll do little to stimulate the global economy. Economist Dawson added that provided the world approved about $2 trillion in fiscal stimulus by early 2009, the global economy could begin to recover by Q3 2009.

Tags: China, E.U., emerging markets, fiscal policy, fiscal stimulus, gdp, IMF, International Monetary Fund, inthenews, Japan, U.S. economy

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Reader Comments (Page 1 of 1)

12-30-2008 @ 12:56PM

BHarrison said...

In the distant future, will they look back upon these times as the "dark age" that destroyed capitlaism as we know it?

The extent of the sweeping changes that will come out of this economic disaster will take a decade to settle out, maybe even longer.

The ONLY VAIBLE SOLUTION is for government to instill true INTEGRITY to our financial institutions and corporations. Without INTEGRITY, instilled via prudent basic regulations and oversight for effective enforment of the regulations, nothing is really going to change that much . . . everyone will continue to "game" the systems; and there will be a gross lack of confidence and faith in the markets and corporations.

The "solutions" are relatively "simple"; but will be difficult and time consuming to put into place, especially the effective oversight; however that is the only real alterantive. Anything else will leave us in a crippled condition economically. Isn't it rather ironic that "doing the right things" are just so difficult for our leaders to achieve? Neither our political or business leaders can accept having a "level playing field for all of the participants . . . the investors versus the "insiders".

While it has always been that way; the difference is just glaringly obvious amidst this economic disaster. And the people lack the well or the vehicle to force these changes . . . esp. as longas the DNC and RNC are controlled behind the scenes by the special interests.

12-30-2008 @ 2:31PM

BHarrison said...

An example of "those who need assistance":

My "islander neighbor" across the street in his $435K two story 2,500 sq ft 15 y/o home on the lake, with his jaguar and SUV and a swimming pool . . . the guy is a baggage handler at MIA, his wife is some type of nurse. They drive a fairly new jag and have a Toyota SUV. There are six kids in the family.

And a short time ago, their "star athlete" son was arrested for roughing up a girl friend and stealing her car and her purse? He wasn't around for a while, so I guess the judge gave him some jail time.

The home is owned by the wife and some relatives (one of the neighbors in the community checked this out on the tax records.). They have various outstanding judgements on the home and I've received calls from a couple of their creditors trying to get me, a neghbor, to "do them a favor" and tell them to call their creditors . . . ha!

These people simply DO NOT deserve ANY type of a bailout! They are milking the system for every nickel that they can get . . . is this what our nation has become; a lot of freeloaders 'gaming" the systems?

It is incredible that these types of people are able to stay in this house for this long. People like them simply do NOT deserve any type of a bailout!

What is the matter with our society?

There are no "entitlements" to live beyond one's means. Let them go rent a house in the ghetto.