Massive, Globally Coordinated Fiscal Stimulus is Needed: Going From the Drawing Board to Swift Action

In just over a year, the mid-2007 sub-prime housing debacle in the United States has escalated into a global financial crisis and pushed the world economy into recession arguably the deepest since World War II. Bold monetary policy action and massive bailout packages in the United States and other major developed countries may have stemmed the financial blood-letting, but have not worked to avoid the current economic downturn. At the start of 2009, credit markets remain constrained, asset and commodity prices have deflated, and global trade is seriously depressed as industrial production has moved sharply into negative territory. Unemployment rates are up throughout the developed world and prospects in developing countries are getting dimmer by the day. The threat of a prolonged depression remains very real.