Leaders disagree on cure for global economy; Philippines in state of emergency after election murders; new Japanese consumer more budget conscious; some success in Israeli hostage negotiations; eight men charged in Somali terror case in US; and more

Top of the Agenda: Recession Questions

Global leaders are diverging on the most appropriate stimulus measures as the global economy teeters on the brink of recovery. Managing Director of the International Monetary Fund Dominique Strauss-Kahn said Monday that the global economy remained vulnerable (FT) to shocks and policy mis-steps and that fiscal and monetary stimulus needed to continue. He said "It is too early for a general exit. We recommend erring on the side of caution, as exiting too early is costlier than exiting too late." U.S. Federal Reserve Chairman Ben Bernanke also said last week that inflation was not an immediate threat and that interest rates would likely remain low for "an extended period." Meanwhile, European Central Bank officials have said that implementing exit strategies too late could lead to future crises.

The Wall Street Journal reports that the differing approaches of the U.S. and U.K. central banks will likely be compared on December 3, when both Trichet is expected to unveil details of the European Central Bank's exit strategy and Bernanke is scheduled to appear before the U.S. Senate for his confirmation hearings. So far, the Fed has focused on asset purchases of Treasuries and mortgage-backed securities, while the ECB's approach has centered on unlimited loans to banks. A move by Bernanke to emphasize Fed willingness to keep policy loose as Trichet "heads for the exit" could ultimately fuel a rise in the euro and depress euro-zone exports.

Analysis

In the New York Times, Paul Krugman says that the Obama administration has been intimidated on his economic policy to pay more attention to debt than to adequate stimulus measures and unemployment.

In Foreign Affairs, Fred Bergsten says the global economic crisis has revealed the folly of large U.S. budget and trade deficits, as well as of the strong dollar that makes them possible. He says the United States must balance the budget, stimulate private saving, and embrace a declining dollar.

Background

In a CFR meeting, Richard Posner and Tim Ferguson discuss fiscal and monetary policy in the United States.

A CFR Backgrounder examines the U.S. economic stimulus plan.