Ending the fiscal and monetary stimulus will be much harder than starting it.
You will hear a lot about “exit strategies” in 2010. After saving the world economy from collapse with a combination of bail-outs, monetary loosening and fiscal stimulus of heroic magnitude, governments across the globe will want to retreat from this largesse as soon, and as smoothly, as possible. They will have trouble on both counts.
History shows clearly that this can be dangerous. In both America in 1937 and Japan in 1997, ill-timed tax increases sent fragile economies back into recession. The exit strategists of 2010 will have to avoid, if they can, the same peril.
You will hear a lot about “exit strategies” in 2010. After saving the world economy from collapse with a combination of bail-outs, monetary loosening and fiscal stimulus of heroic magnitude, governments across the globe will want to retreat from this largesse as soon, and as smoothly, as possible. They will have trouble on both counts.
History shows clearly that this can be dangerous. In both America in 1937 and Japan in 1997, ill-timed tax increases sent fragile economies back into recession. The exit strategists of 2010 will have to avoid, if they can, the same peril.