The US wants the focus of the Group of 20 (G-20) summit next month to shift from revamping financial regulation to increasing emergency stimulus spending. Funny enough, that's exactly what world leaders have been doing the last five months. Political redundancy is standard practice, but it's still worthwhile to pause and examine America's call to action.
Recently, Germany proved unwilling to add to its deficits to aid Eastern Europe. But when it comes to its own economy, Germany is a bit more generous. The German parliament has approved two stimulus packages totaling 82 billion euros since last November—the country's largest stimulus since World War II. Indeed, for countries that can afford it, few have met the economic downturn with tight purse strings.
Following on the heels of the US last year, country after country announced large stimulus packages to ameliorate deleterious effects from the financial crisis and bolster their economies. Combined, the amount of global stimulus now is staggeringly massive and historically unprecedented—a virtual sledgehammer ready to pound the global economy into activity. Already, there are signs stimulus in parts of the world may be having the desired effect.
Ultimately, the G-20 summit will be an opportunity for world leaders to showboat, little else. Most, if not all, scheduled topics have already been much belabored and will likely continue to be for some time. What the summit is promising to accomplish in terms of encouraging global stimulus has pretty much already happened: Without any central governing voice telling them to do so, governments around the globe have acted in largely coordinated fashion to deploy monetary and fiscal stimulus to boost economies.
Stimulus across the globe will vary in size—as it should. Individual governments and central banks are better positioned to gauge how much stimulus is appropriate for their economic situations. They know if more money is thrown into their economies than can be absorbed, they'll have to contend with inflation down the line. A more broad-spectrum decree is less likely to address particular concerns.
So far, during the financial crisis and global downturn, we've seen countries sign more free trade agreements, widely denounce protectionism, and deploy coordinated monetary and fiscal stimulus.
Politicians may be late to the game when it comes to rhetoric, but so far their actions have principally been swift and essential to a speedy economic recovery.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.