The World Bank now expects the global economy in 2009 to contract for the first time since 1945. Not slow growth for the world's economy -- negative growth.
NYU Economics Professor Nouriel 'Dr. Doom' Roubini says the need for intervention is great. "It's like a patient battling for life in an emergency room," Roubini, told Bloomberg News Friday. "That's not the time to advise about the benefits of exercise and healthy diet. You have to first make sure the patient survives." Hopefully, the words will be few and fiscal stimulus committed to many, as G-20 finance ministers meet this weekend in preparation for the head-of-government G-20 meeting in three weeks.
This crisis means differences, particularly those between the two top economic powerhouses -- the European Union and United States -- have to be put aside. The E.U. is emphasizing the coordination of business regulation, while the U.S. wants to focus on additional stimulus needed to jump-start the global economy. Meanwhile, Chinese Premier Wen Jiabao's is concerned about the the safety of its large U.S. Treasury holdings, the AP reports.
One thing we don't need: a meeting of finance ministers marred by bickering.
What the global economy does need is about $2-2.5 trillion, depending on the analysis used, in additional fiscal stimulus, with at least $500 billion of that occurring in the United States. Also: continued, successful coordination of major central bank monetary policy, including quantitative easing and balance sheet expansion.
Economic Analysis: Here's hoping G-20 finance ministers can approve an outline to seek appropriation for more fiscal stimulus. They're not likely to commit to $2 trillion or more, but anything above $1 trillion would be a step in the right direction, a ray of light.
As usual, international monetary policy has been ahead of fiscal policy, but investors shouldn't attach too much negative sentiment to that: that is par for the course in democracies. The key now is getting additional commitment by the E.U., U.S., China, and Japan regarding "Fiscal Stimulus - The Sequel'. We are in a pronounced recession and more stimulus will be needed to prevent the dreaded downward spiral.
Financial Editor Joseph Lazzaro is based in New York.
Roubini says global economy is 'battling for life'