Fighting the Recession with Legislation Across the Globe

The current economic crisis that (arguably) began in the United States with the subprime mortgage crisis and has undoubtably spread across the globe.  While the international implications are evident, the United States government has been working dilligently to pass legislation that will help get our Nation’s economy out of this rut.  Yet, from the United Kingdom to East Asia to the European Union, other nations’ governments are following suit and passing rescue and stimulus plans to cope with the effects of the global financial crisis.25-global-financial-crisis-1310-430x

On October 8, 2008 the British government announced a bank rescue package totalling some $850 billion U.S. dollars.  The plan provides for 200 billion Euros to be made available for short term load through the Bank of England.  The government will also support Biritish banks in their effort to increase market capitalization by setting up the “Bank Recapitalization Fund”.  This fund will lend 25 billion Euros in the first instance of need and 25 billion more that can be called upon if need.    In addition to the lending, the British government is willing to underwrite any eligible lending between British banks.  Also on October 8, there was a coordinated effort by seven central banks to to cut interest rates by .5% (these banks included The Bank of England, The European Central Bank, The U.S. Federal Reserbve and the central banks of China, Switzerland, Canada, and Sweden).

Similar to the actions taken by the British Government, the People’s Republic of China announced a US$ 586 stimulus package on Novermber 9, 2008.  This package will be invested in key areas suh as housing, rural infrastructure, tax-cuts, and finance.  There was also a meeting of the East Asian Countries of China, South Korea, and Japan to discuss the global economic crisis.  This collaborative effort was not unique as the European Union also came together to propose a European stimulus plan that would affect all 27 members of the Union.

What does this all mean?  It means that while we may be centered around and focused on the U.S. economy, the problem extends far beyond our borders and nations all over the globe have recognized the brevity of this situation.  This brings up questions of whether or not the U.S. acting alone can bring an end to this recession.  It may take global collaborative efforts to really bring the world out of this rut and get the economies headed once again in the right direction.

4 Responses

  1. Josh,

    Can you please link to sources for the British and Chinese bailouts?

    Do they include fiscal stimulus? For what kinds of things?

  2. It’s interesting that while the US faces this economic crisis, many people fail to see or even don’t care how this situation is interconnected globally. With the fall of one market, the next came qickly and swiftly with similar effects. But does this mean that the recovery of markets will follow the same path? Can one economy recover without the other?

  3. It is strange how, once the U.S. became established, everything began to revolve around it. Other nations have dived right into the U.S. Economy without a thought… Now everyone is in trouble. I think that it is important for out government to keep other nations in mind as they dole out the dough.

    To give an answer to Geoff’s question… yes, some economies can recover without other economies… but I think ( and this may be hugely self centered) that it will be a lot more difficult for many economies to recover if the U.S. does not.

  4. That’s a very good question: “Can one economy recover without the other?” Due to the size of our economy, and that it has so much interconnectedness with other economies, it seems like in order for one to suceeed it needs the other. If the U.S. economy falls, it brings so many others down with it.

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