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While this is not exactly like a patient in the emergency room receiving an electric jolt to restart his heart, the world's economic patients have been receiving "jolts" of economic stimulation for over a year without significant improvement. In fact, some perceive the "procedure" to be counter-productive....
G20 drops support for fiscal stimulus
By Chris Giles and Christian Oliver in Busan
Published: June 5 2010 11:54 | Last updated: June 5 2010 11:54
Finance ministers from the world’s leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction.
The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, also dropped proposals for a global banking levy, instead giving countries leeway to do what they thought best for their domestic circumstances.
The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability,” the communiqué stated.
“Those countries with serious fiscal challenges need to accelerate the pace of consolidation,” it added. “We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”. [read more]Here in the U.S., the Federal government tends to dismiss the notion that the Federal government cannot be successful with that same expansionary fiscal policy. The size of the U.S. economy tends to mask the dangers of continual stimulation. The question is how long will the economic muscles twitch from the stimulation?