The U.S. subprime mortgage crisis, which became a developed country banking crisis, is now a global economic meltdown. Global growth projections have fallen, stock markets have plummeted, and currencies have lost value against the dollar. Meanwhile, the call has increased for coordinated deficit spending (fiscal stimulus packages) and the slashing of interest rates (monetary policy intervention) around the globe.
The map below shows how each of the G20 countries—the club of 20 large economies—has responded to the growing financial crisis using both fiscal and monetary policy. Middle-income coutnries have struggled to implement the necessary changes, but coordinated action is essential.
The U.S. Is Falling Short in its Response to the Global Meltdown
Roll over a G20 country for details about its response to the global financial crisis
The policy options—both fiscal and monetary—are only available to the handful of countries which have the ability to defend themselves from capital flight or can fund their fiscal deficits. With the notable exception of China, most middle-income countries have struggled to make the necessary policy interventions. Least developed countries look on with concern as necessary expansions in aid are threatened. Options for these countries are running out, but the costs of inaction could be more catastrophic still.
The United States must take the lead by implementing a fiscal stimulus package and helping create a new international economic policy focused on advancing living standards around the world.
Read more about a new international economic policy for the United States:
- Transitioning to a New U.S. International Economic Policy, by Richard Samans
- Putting Aid and Trade to Work, by Sabina Dewan and Reuben Brigety
- The Global Meltdown, by Will Straw
Note: Fiscal policy figures were derived from ft.com and Bloomberg.com. In some cases numbers are disputed. Interest rate figures vary by country. We used the interbank rate in Argentina, Canada, China, Mexico, and Turkey; the policy rate in Australia, Brazil, Indonesia, Japan, South Korea, and the United Kingdom; the European Central Bank’s deposit facility rate for France, Germany and Italy; the refinance rate in India, Russia, Saudi Arabia, and South Africa; and the Fed Funds Rate in the United States. All data is current as of December 12, 2008.