e5c0510346f86f100f4cb701_pa3234c.jpg

The Bogey of Fiscal Stimulus

Despite the need for strong and sustained fiscal stimulus in many countries, today's political leaders seem to be held hostage by financial interests and associated media, ideologists, and oligarchs. As a result, the main threat that now confronts us is not public debt or inflation but rather a downward economic spiral.

NEW YORK – After the economic disaster of 2008-2009, people are understandably wary of the devastation that yet another financial crisis can wreak. But the likelihood of another crisis is quite small, and its adverse impact would be far less devastating this time around, as there are no more massive credit or asset bubbles to burst.

That has not stopped pundits and the media from exaggerating such fears, distracting from greater efforts to overcome protracted stagnation for much of the developed world, which will inevitably drag down economic recovery elsewhere, especially in developing countries.

The current favorite bogeyman is public debt. Much is being made of high levels of sovereign debt on both sides of the Atlantic, and in Japan. As the economics commentator Martin Wolf has noted, “The fiscal challenge is long term, not immediate.” Likewise, while Japan has the highest debt-to-GDP ratio among rich countries, this is not a serious problem because the debt is domestically held. And Europe’s debt problems are now widely acknowledged to be due to ill-conceived aspects of European integration.

We hope you're enjoying Project Syndicate.

To continue reading and receive unfettered access to all content, subscribe now.

Subscribe

or

Unlock additional commentaries for FREE by registering.

Register

Support High-Quality Commentary

For more than 25 years, Project Syndicate has been guided by a simple credo: All people deserve access to a broad range of views by the world's foremost leaders and thinkers on the issues, events, and forces shaping their lives. At a time of unprecedented uncertainty, that mission is more important than ever – and we remain committed to fulfilling it.

But there is no doubt that we, like so many other media organizations nowadays, are under growing strain. If you are in a position to support us, please subscribe now.

As a subscriber, you will enjoy unlimited access to our On Point suite of long reads, book reviews, and insider interviews; Big Picture topical collections; Say More contributor interviews; Opinion Has It podcast features; The Year Ahead magazine, the full PS archive, and much more. You will also directly support our mission of delivering the highest-quality commentary on the world's most pressing issues to as wide an audience as possible.

By helping us to build a truly open world of ideas, every PS subscriber makes a real difference. Thank you.

Subscribe Now

https://prosyn.org/5LMCLjC