Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

boskin47_Jim Watson_AFP_Getty Images_obama bill Jim Watson/AFP/Getty Images

Out of Ammunition to Combat Recession?

The next recession probably will not be as bad as the last one; but unprecedented long-term monetary stimulus and spikes in public-debt burdens have left governments unequipped to deal with an economic downturn. Gradual monetary-policy normalization and fiscal consolidation are the only prudent options now.

STANFORD – Economic forecasts for 2017 project continued frailty in the global economy, and subpar growth for most countries and regions. Obvious economic problems include Europe’s weak banks, China’s distorted property market, political uncertainty in the West, historically high private and public debt – 225% of GDP, according to the International Monetary Fund – and the reluctance of heavily indebted Greece and Portugal to comply with IMF programs.

Additional global economic risks, such as a major oil-market disruption that could drive prices up, are not as obvious, and thus receive less attention. Economists call such events “shocks” precisely because they come unexpectedly and can have far-reaching consequences.

Unprecedented long-term monetary stimulus and massive spikes in public-debt burdens have left governments poorly equipped to manage the next economic downturn when – not if – it arrives. The next recession probably will not be as bad as the last one, but advanced economies will be far better prepared for it if they undergo gradual monetary-policy normalization and fiscal consolidation in the meantime.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/2lOFKDG;
  1. lhatheway7_Claudio Santistebanpicture alliance via Getty Images_ECBFedLagardePowell Claudio Santisteban/picture alliance via Getty Images

    Restoring Central Banks’ Credibility

    Larry Hatheway

    The old central-bank playbook of slashing interest rates to spur consumption, investment, and employment has become less effective since the 2008 financial crisis. Yet without effective tools and the public's confidence, central banks will be unable to rise to the occasion when the next recession arrives.

    0
  2. fischer163_action press-PoolGetty Images_natoflagsoldiers Action Press-Pool/Getty Images

    The Day After NATO

    Joschka Fischer

    French President Emmanuel Macron has drawn criticism for describing NATO as brain dead and pursuing a rapprochement with Russian President Vladimir Putin. But now that a wayward America could abandon the continent at any moment, Macron's argument for European defense autonomy is difficult to refute.

    9