Economics of War :: Economics Essays

As the United States forges an international military and political coalition to counter the heinous attacks of September 11, it is equally important to ascend a coordinated response to the scotch dimension of the crisis. Acceptance of a financial meltdown or global respite would represent as great a defeat as a failure to avenge the perpetrators of the bombing itself and their protectors. The case for a multilateral economic strategy is compelling. change surface prior to the attacks, the world was experiencing its first synchronized turndown in decades. addition had slowed sharply almost everywhere and turned negative in a number of countries. There was genuine risk of a global recession and the latest, pre-attack US data underscore that possibility here. The terrorist actions will depress economic activity further for at least a while. More importantly, the dump to trustfulness could lead American and other consumers into more cautious disbursal patterns for months or even longer. A worldwide downturn is all in any case possible. A synchronized policy response is thus required. The key profound banks have already taken the first essential steps by pumping sizable amounts of liquidity into the markets to prevent cash shortages that could disrupt commerce, and by devising initial cuts in bear on rates. The OPEC countries have also made a major contribution by announcing that they will maintain oil outturn at levels that will avoid exacerbating the problem. Much more is needed, however. The contiguous move should be a further, coordinated reduction in interest rates by the central banks, especially our own Federal defend and the European Central Bank that manages the euro. (The Bank of Japans interest rates ar already near zero.) Given the urgent need to restore confidence and provide the maximum stimulus to reviving economic activity, the worlds monetary regime should continue to act together in a rapid and fatal manner . All three of the chief economic areas, including Japan as sound as the United States and Europe, should also adopt expansionary fiscal measures. Strangely, the major European countries and Japan have been contemplating spending cutbacks, in the face of recession or sharp slowdown, to meet pre-planned budget targets. This would be akin to the Hoover economics that helped bring on the Great Depression in the 1930s, making a bad situation much worse.