What a difference a year makes …
We started 2011 in recovery mode, admittedly weak and unbalanced, but nevertheless there was hope. The issues appeared more tractable: how to deal with excessive housing debt in the United States, how to deal with adjustment in countries at the periphery of the Euro area, how to handle volatile capital inflows to emerging economies, and how to improve financial sector regulation.
It was a long agenda, but one that appeared within reach.
Yet, as the year draws to a close, the recovery in many advanced economies is at a standstill, with some investors even exploring the implications of a potential breakup of the euro zone, and the real possibility that conditions may be worse than we saw in 2008.
I draw four main lessons from what has happened.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Financial Crisis, Fiscal policy, Fiscal Stimulus, G-20, growth, International Monetary Fund, Multilateral Cooperation, Public debt, recession | Tagged: consolidation, debt, euro area, financial sector regulation, IMF, iMFdirect, International Monetary Fund, investors, Italy, liquidity, multiple equilibria, Olivier Blanchard, perception, recovery, United States. capital flows, year in review | 57 Comments »