Finding the Policy Exit
It is now clear that massive fiscal and monetary easing, together with support of the financial system, has prevented the global economic recession from deteriorating into a depression. But it is just as clear that no recovery can be sustained if governments botch the exit strategy from reliance on large budget deficits and a rapid run-up in public debt.
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NEW YORK – There is a general consensus that the massive monetary easing, fiscal stimulus, and support of the financial system undertaken by governments and central banks around the world prevented the deep recession of 2008-2009 from devolving into Great Depression II. Policymakers were able to avoid a depression because they had learned from the policy mistakes made during the Great Depression of the 1930’s and Japan’s near depression of the 1990’s.