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Depressing Thoughts

If you really want to get depressed about the state of the U.S. and world economy, I recommend reading the columns in the Financial Times today of Martin Wolf and Nouriel Roubini. Roubini warns that “traditional monetary policy” has become “ineffective” in combating the world recession and that “the worst is not behind us.” Wolf sets out the limits of a national focus on a fiscal stimulus in recovering from the recession. Without a change in the global imbalance between surplus countries (like China, Japan, and the oil-producing nations) and the deficit countries (like the US, Spain, and the UK), a fiscal stimulus alone will not be a “durable solution to the challenge of sustaining global demand.” The recession is global and will require global solutions. That was undoubtedly behind Secretary of the Treasury Hank Paulson’s call yesterday for the Chinese to boost the value of their currency against the dollar, which would help American exports at the expense of exports from China to the US and will be on the agenda of his forthcoming trip to China.

--John B. Judis