Ray of Light: G-7 Finance Ministers Vow to Maintain Stimulus

Posted Feb 8th 2010 5:30PM by Joseph Lazzaro
Filed under: International Markets, Recession

Monday's upbeat data point concerns the G-7, which agreed over the weekend to maintain economic stimulus measures, even as institutional investors (among others) start clamoring for nations to address large budget deficits.

Meeting amid the frozen tundra of Iqaluit, Canada (as opposed to the almost equally frozen tundra of Washington, D.C.), Canada's Finance Minister Jim Flaherty said G-7 ministers "are mutually committed" to continuing stimulus, and will start looking at exit strategies after regional economies are on a sustainable growth track, Bloomberg News reported Monday.

Fiscal/Economic Analysis: It's as if those opposing stimulus have followed the script of those who opposed stimulus in the 1930s. First, in 2009, as in 1933, they opposed the stimulus.

Then, in 2010, just as the stimulus starts to take effect, like the mid-1930s complaints, the opponents start chirping about removing stimulus and cutting budget deficits.

Simply, policy makers in the world's major, industrialized economies have to stay the course: recoveries around the world have only just begun, and organic demand is not yet sufficient to enable wholesale efforts to cut spending and raise taxes.

Further, policy makers have latitude, from a price/wage standpoint: inflation, for the most part, has remained in check.

Tags: G7, jim flaherty, JimFlaherty, stimulus, world economy, WorldEconomy