Tag Archives: stimulus

Five Stories You Might Have Missed

A new report issued by the International Monetary Fund on Saturday suggests that the globally economy will contract by 1.3 percent in 2009 with a slow recovery beginning in 2010. While the United States has been pushing countries to expand stimulus spending, the IMF said that existing stimulus spending already committed for 2009 should be sufficient to address the crisis. A Friday meeting of the finance ministers of the G7 countries was more cautious, concluding that, “the pace of decline in our economies has slowed and some signs of stabilization are emerging,” but simultaneously warned that “downside risks persist.”

In news outside the global economic crisis from the last week:

1. The outbreak of a new flue strain has raised concern in Mexico, as 68 people have died and more than 1,000 have been infected. The World Health Organization is monitoring the situation to determine if it is likely to reach pandemic status. While the Mexican government is urging people to remain calm, authorities have already canceled more than 500 public events and many residents in Mexico City have opted to stay home rather than travel for shopping and work. Tests have also confirmed the virus has made people in California, Texas, Kansas, and New York ill.

2. Elections in Iceland have produced the country’s first center-left government. The previous government of Iceland had been forced to resign as a result of the devastating impact of the global financial crisis on the country. Preliminary election results give Johanna Sigurdardottir’s Social Democrats 30 percent of the vote. With their coalition partner, the Left Greens’ 22 percent of the vote, the coalition appears well-positioned to drive the political agenda in Iceland. Sigurdardottir becomes the first openly gay person elected head of state in the modern world. The first item on her agenda: Icelandic membership in the European Union.

3. While the Obama administration is hoping to resume the six-party talks with North Korea, the government of North Korea appears to be taking a more hardline stance. Earlier this month it test fired a long-range missile, sparking a confrontation with the UN Security Council. Last week, the government of North Korea last week announced it would put two U.S. reporters on trial, charging them with illegal entry and “hostile acts.” Additionally, after expelling international atomic inspectors two weeks ago, North Korea has announced its intention to resume plutonium extraction. It is widely believed that North Korea already possesses enough plutonium for six to eight nuclear bombs. According to some observers, the deteriorating relations between North Korea and the West may be part of the country’s efforts to force the United States into direct, bilateral negotiations.

4. The sharp upsurge of violence in Iraq, including two suicide attacks that killed 75 people outside a Shia shrine in Baghdad on Friday, have raised concerns that Iraq is sliding back into civil war. Recent attacks raise the concern of sectarian violence, suppressed by a strong U.S. presence over the past year, but never entirely defeated.

5. Reversing a longstanding policy of the Bush administration, Secretary of State Hillary Clinton announced on Thursday that the United States would be willing to work with a Palestinian government backed by Hamas so long as the organization met international demands to renounce violence and recognize Israel’s right to exist.  The Bush administration had refused to work with Hamas, which has effectively controlled the Palestinian government since it defeated its rival, Fatah, in elections in 2007. Meanwhile, Israeli Prime Minister Benjamin Netanyahu is under pressure to engage meaningfully in international diplomacy and to be seen acting.

And because it was such a busy week internationally, here are two bonus stories from this week:

6. The rebel Tamil Tigers in Sri Lanka on Sunday declared a unilateral ceasefire, a move almost immediately rejected by the government. An operation launched by the government last month has effectively confined the Tamil Tigers to a small enclave in the northern part of the country, and the government is expected to announce the defeat of the Tigers any day. But the United Nations has described the situation as a humanitarian disaster, with more than 6,500 civilians already killed and as many as 100,000 refugees created as a result of the fighting.

7. It was announced on Friday that China has become the world’s fifth largest holder of gold reserves, with 1,054 tones of gold. Seen as part of a broader strategy to diversify its nearly $2 trillion in foreign exchange reserves, the government of China has slowly been building its gold reserves over the several years. However, even with the recent purchases, China has a level of gold reserves (as a percent of its total reserves) far below that of the United States and other developed countries.

Advertisements

Five Stories You Might Have Missed

The world is preparing for the upcoming G20 summit, scheduled to meet in London later this week. While each country is arriving at the meeting with their own objectives, it is clear that the global financial crisis will dominate discussions. In this context, the main issues on the table appear to resolve around three key policy debates: developing a globally coordinated stimulus package, strengthening global financial regulation, and reforming the international financial architecture, particularly the International Monetary Fund. Police are preparing for widespread tens of thousands of protestors accompanying the meeting.

In other news from the previous week:

1. President Barack Obama on Friday announced that the U.S. would expand its commitment in Afghanistan, sending an additional 4,000 troops to train Afghan security forces. The Obama administration is also hoping to refocus the U.S. mission in Afghanistan, moving away from the nebulous mission of national building and democratization and instead focusing on defeating al-Qaeda and Taliban militants operating along the Afghan-Pakistan border. FT blogger Gideon Rachman raises some important questions about the new strategy, pointing out that bringing the fight to al-Qaeda militants in Pakistan may well undermine the stability of Pakistan—an ultimately self-defeating strategy, he argues.

2. After struggling for weeks to secure a coalition government, incoming Israeli Prime Minister Benjamin Netanyahu was able to convince their center-left rival, the Labour party, to join a new coalition government on Tuesday. Netanyahu hoped to bring the center-left Labour party into the coalition in order to avoid allying with a number of far right parties and running the risk of souring relations with the U.S.  Nevertheless, the new government raises concerns among many Palestinian leaders about the future prospects of the peace process.

3. The medical journal the Lancet offered a powerful criticism of Pope Benedict’s recent speech during a trip to Cameroon and Angola. During the visit earlier this month, the Pope claimed that condom use increased the prevalence of AIDS on the continent. After the World Health Organization and other AIDS experts attacked the claim, the Vatican last week issued a statement that reasserted the Pope’s claim that condom use was both ethically wrong and actually exacerbated the AIDS crisis. The condom/AIDS debacle is just the recent in a series of missteps and controversies that have plagued the current Pope. In February, he lifted the excommunication of four ultra-conservative clerics who denied the holocaust. And in 2006, he quoted a fourteenth century emperor who characterized Islam as “evil and inhumane.”

4. On a Thursday press conference with British Prime Minister Gordon Brown, Brazil’s President Luiz Inácio Lula da Silva told reporters, “This [current global economic] crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing…I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.” Brown immediately sought to distance himself from the comments. But the comments underline the potential difficulty of securing agreement at the upcoming G20 meeting, in which Argentina and Brazil will be pushing for reform of the international financial institutions and campaigning against protectionist policies in the developed world.

5. German Chancellor Angela Merkel cautioned against excessive stimulus spending in Europe while at the same time calling on China to expand its stimulus package in an effort to address the global financial crisis. In an interview given in anticipating of the upcoming G20 summit, Merkel argued that the current crisis was caused, in part, by policies which facilitated unsustainable growth with too much money. She argued it was necessary to avoid repeating those mistakes in the recovery. Spain’s finance minister, Pedro Solbes, on Friday said that Spain would not be able to expand its own stimulus spending, fearing that excessive national debt would undermine future economic prospects.

Fixing the Economic Stimulus

On Monday, two heavy hitters in economics weighed in on the economic crisis facing the United States (and the global economy more generally).  In an opinion piece published in the New York Times, Nobel Prize-winning economist Paul Krugman offered a powerful argument in favor of a Keynesian-style stimulus package.  In particular, he contends that because the Federal Funds rate is effectively at zero, the only real policy option remaining for the U.S. government is a fiscal stimulus package.  In an article writing for CNN, Nobel Prize-winning economist Joseph Stiglitz offers an equally powerful critique of the current discourse surrounding the economic stimulus packageBoth make powerful points in addressing the current crisis.  Hopefully, Geithner is listening.