My Outlook for 2009

DAVOS – The future of the global economy will depend greatly on whether President Barack Obama launches a comprehensive and coherent set of measures, and on how successfully he carries them out. How the Chinese, Europeans, and other major players respond will be almost as important. If there is good international cooperation, the world economy may start climbing out of a deep hole by the end of 2009. If not, we will face a much longer period of economic and political disorder and decline.

There is no way to reestablish economic equilibrium in one fell swoop. Instead,  the economy must first be pumped full of money to make up for the collapse of credit; then, when credit begins to flow again, the liquidity must be drained from the system almost as fast as it was injected. This second operation will be both politically and technically more difficult than the first: it is much easier to give money away than to take it back. It is all the more important that stimulus packages be channeled into relatively productive investments. The bailout of the motor industry ought to be the exception, not the rule.

The Dollar

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