News / Economy

Central Bankers: Economic Depression Averted, But Debt Crisis Remains

Multimedia

Audio

Bold action by central banks and national governments staved off a global economic depression during the financial crisis of 2008 and 2009, but at a tremendous cost nations will struggle to overcome.  That is the conclusion of a panel of trans-Atlantic central bankers that recently convened in Washington.

First the good news: after contracting slightly in 2009, global economic output is expected to grow more than 4 percent this year, according to the International Monetary Fund.  With a fledgling recovery gaining strength, it is easy to forget how close major industrialized nations came to economic collapse less than two years ago, an outcome that almost surely would have triggered a worldwide depression rivaling the Great Depression of the 1930s.

In short, the pain, havoc, and economic devastation could have been far worse, according to the head of the U.S. Federal Reserve Bank of Dallas, Texas, Richard Fisher.   Addressing central bankers from Europe and elsewhere, Fisher said central banks and national governments averted catastrophe through aggressive intervention.

"We did our job.  A significant phase [crisis] has been passed through with as little harm done as conceivably could have been done under the circumstances.  And I believe we pulled the economy back from the abyss."

Success

To combat a crippling credit freeze, central banks slashed interest rates and pumped cash into credit markets.  To combat a severe economic slowdown, governments of major economies sharply boosted spending to stimulate activity.

Jurgen Stark, executive member of the European Central Bank, said the combined response proved a success. "It has to do to a large extent with the stimulus measures taken by governments, and by the very vigorous response of central banks on the crisis. But this has a price," he said.

Price to pay

That price, according to Stark, is crushing debt. "Most governments in the advanced economies will exit from the recession with the highest deficits and the highest debt-to-GDP [gross domestic product] ratios recorded in times of peace," he said.

Stark said the debt burdens are unsustainable.  He said massive fiscal deficits will constrain economic growth and job creation, increase inflationary risks, boost interest rates, and reduce private investment in productive enterprises.

That warning was echoed by Richard Fisher of the U.S. Federal Reserve. "This is of great concern to us at the central bank," he said. "We spend too much money, and we take in too little of it in the United States."

But trimming deficits is the job of elected officials, and Fisher had a blunt message for them. "The bottom line: it is now time for our fiscal authorities to do what fiscal authorities are paid to do, why they were elected to Congress: bring about some balance.  And that will be a very tough battle," he said.

As in many countries, America's elected officials are loathe to raise taxes or cut spending, particularly when the economy is weak and millions are out of work.  U.S. President Barack Obama has proposed a freeze on non-entitlement domestic spending, while awaiting recommendations from a bipartisan commission tasked with charting a course to a balanced federal budget.  In the meantime, the U.S. federal deficit exceeded $1 trillion last year, and is projected to do so again this year.

You May Like

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.