Stimulus v austerity: Sovereign doubts

Posted: September 27, 2013 in economy
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The new face of terror

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Stimulus v austerity


The fourth in our series of articles on the financial crisis looks at the surge in public debt it prompted, and the debate about how quickly governments should cut back

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ECONOMISTS are an argumentative bunch. Yet before the crisis most found common ground in the notion that fiscal stimulus was an obsolete relic. Monetary policy seemed wholly capable of taming the business cycle. Government efforts to increase spending or cut taxes to battle unemployment would only muck things up. When crisis struck in 2008, however, that consensus evaporated.
The frightening speed of the economic collapse spurred governments to action, in spite of economists’ doctrinal misgivings. In 2009 many countries rolled out big packages of tax cuts and extra spending in the hope of buoying growth. This stimulus amounted to 2% of GDP on average among the members of the G20 club of big …

via Economic Crisis


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