Getting $120 Trillion Into The Global Economy

It used to be that $1 trillion seemed like a lot of money. Now the Obama administration-to-be says that it plans to put just short of that sum into the US economy over the next two years in the hope of creating between two and three million jobs.

The does not include the short-term capital the the Fred is pumping into banks through its emergency lending window.

On the other side of the Pacific, the Chinese have their own package for reviving their slowing economic system. Last month, the government in the world’s most populated country said it would lay out over $600 billion in the next two years.

Spreading the investment of the money over such long periods of time may mean the effect will be too late to halt the current recession. It may keep the downturn from moving into a multi-year catastrophe, if the sums are enough.

The head of the IMF says that the amounts the the world’s governments want to pump into the economic system are not nearly enough. According to Reuters, "The IMF has called for fiscal stimulus — higher government spending and temporary tax cuts — worth $120 trillion, or 2 percent of global annual economic output, to fill the gap caused by slumping private demand following the credit crunch."

The arguments about how much is enough will fiddle while Rome burns. It is becoming increasingly clear as the deep economic downturn moves from country to country that the proposed stimulation packages being put on the table are not helping the markets or major financial institutions. If they do not help job creation and business and consumer spending the IMF will have called the ball, meaning the US government $1 trillion program will be like going after an elephant with a pea shooter.

Douglas A. McIntyre