The G20 summit in London concluded this week and the leaders of the member countries have committed to $1.1 trillion in new funds which will greatly increase the capital available to the International Monetary Fund. The goal in mind is a revival in trade, which is expected to contract this year for the first time in 30 years. Of note however the combination of loans and guarantees fell short of an injection of fresh fiscal stimuli into the world economic system — this was due to division between Continental Europe and the United States over whether to act now or wait to see whether existing spending measures took effect.
Most member countries have already committed major funding outlays and released vast sums of funds into their economies through various mechanisms - in the US this has meant buying up the bad debts and loans which their banking system had both created and then shared with the world. In Australia, the strategy is to stimulate consumer spending by providing actual cash payments to families earning under $100K per annum. The question is whether these levels of payments are sufficient to compensate for the loss of economic activity due to the mismanagement in part of the world (and US in particular) banking system. Will it be enough?
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