Project Syndicate - Has Global Stag-Deflation Arrived?

Has Global Stag-Deflation Arrived?
by Nouriel Roubini
"Given the severity of this economic and financial crisis, financial markets will not mend for a while. The downside risks to the prices of a wide variety of risky assets (equities, corporate bonds, commodities, housing, and emerging-market asset classes) will remain until there are true signs – towards the end of 2009 – that the global economy may recover in 2010."

Project Syndicate - Good News in Bad Times

Good News in Bad Times
by Jeffrey D. Sachs

"...these successes... share a similar pattern. They address a well-defined and serious challenge, for example low food production or a specific disease, and are based on a well-defined set of solutions, such as agricultural equipment and inputs needed by peasant farmers, or immunizations.

Small-scale demonstration projects prove how success can be achieved; the challenge then becomes taking the solutions “to scale” in nationwide or even worldwide programs. Leadership is needed, within the countries in need as well as among the rich nations that can help to launch and finance the solutions. Finally, modest amounts of money, directed at practical problem solving, can make an historic difference.

...we will lose the battle against poverty and misery only if we give up, and fail to heed the intelligence and goodwill that can be mobilized today. And perhaps next year, the United States will rejoin the global effort ...”

IMF Fiscal Policy for the Crisis

Here is the entire IMF report on "Fiscal Policy for the Crisis"

"The current crisis calls for two main sets of policy measures. First, measures to repair the  financial system. 

Second, measures to increase demand and restore confidence. 

While some of these measures overlap, the focus of this note is on the second set of policies, and more specifically, given the limited room for monetary policy, on fiscal policy.

The optimal fiscal package should be timely, large, lasting, diversified, contingent, collective, and sustainable: timely, because the need for action is immediate; large, because the current and expected decrease in private demand is exceptionally large; lasting because the downturn will last for some time; diversified because of the unusual degree of uncertainty associated with any single measure; contingent, because the need to reduce the perceived probability of another “Great Depression” requires a commitment to do more, if needed; collective, since each country that has fiscal space should contribute; and sustainable, so as not to lead to a debt explosion and adverse reactions of financial markets.  

Looking at the content of the fiscal package, in the current circumstances, spending increases, and targeted tax cuts and transfers, are likely to have the highest multipliers. General tax cuts or subsidies, either for consumers or for firms, are likely to have lower multipliers."

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