Global+Economic+Stim+Package

**__Global Economic Stim. Plan__** Devin McDonnell - 2/24/09

 New estimates for 2009 suggest that lower economic growth rates will trap 46 million more people on less than $1.25 a day than was expected prior to the crisis. An extra 53 million will stay trapped on less than $2 a day. This is on top of the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices.  The new research shows that the sharply lower economic growth rates will significantly retard progress in reducing infant mortality. Preliminary estimates for 2009 to 2015 forecast that an average 200,000 to 400,000 more children a year, a total of 1.4 to 2.8 million, may die if the crisis persists. [global crisis news.com]  //Therefore, // The crisis is now so fast-moving and harmful to the global economy that it demands an unprecedented degree of worldwide coordination. [NYtimes]  The financial crisis and other issues such as climate change, are too big for individual nations to tackle on their own. [ACCA, global body for professional accountants.]  The costs of the regulatory race to the bottom and subsequent failure have been colossal, and it is thus time to start building a 21st century regulatory framework. [financialcrisisupdate.com]  For this, regulators should look to the recommendations Financial Stability Forum, the European Union and the International Monetary Fund. - recommendations from Hans Hoogervorst, Chair of the Netherlands Authority for the Financial Markets [financialcrisisupdate.com] The need for far-reaching consolidation of the U.S. regulatory system is now widely recognized. - contributed to serious lapses in oversight and created incentives for regulatory arbitrage. - Europe’s regulatory system does not seem to be in much better shape. [financialcrisisupdate.com]
 * __Pro arguments__**
 * What the //global effects// going to be of this crisis? **
 * <span style="font-size: 12pt; color: black; font-family: 'Times New Roman','serif';">The World Bank issued a press release predicting devastating figures on poverty around the globe: **
 * <span style="font-size: 12pt; color: black; font-family: 'Times New Roman','serif'; mso-fareast-font-family: 'Times New Roman';">Economic Crisis May Kill 400,000 Babies a Year **<span style="font-size: 12pt; color: black; font-family: 'Times New Roman','serif'; mso-fareast-font-family: 'Times New Roman';">
 * <span style="font-size: 16pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">The Problem is too big and too bad – we need teamwork **<span style="font-size: 16pt; color: black; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: 'Times New Roman';"> <span style="font-size: 12pt; color: black; font-family: 'Times New Roman','serif'; mso-fareast-font-family: 'Times New Roman';"> <span style="font-size: 16pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: SimSun; mso-fareast-theme-font: minor-fareast;">
 * Regulatory reform should be structured nationally, regionally and globally. **
 * U.S. regulatory framework is outdated, fragmented and hole-ridden **

<span style="font-size: 12pt; line-height: 115%; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> “**At a minimum, you want to curtail damage.** **At a maximum, we can avoid even greater problems.** You can get general principles — the need for a swift recapitalization of the banks, the need for liquidity — so we don’t get an even bigger credit crunch.”- Carmen M. Reinhart, professor of economics at the [|University of Maryland]. The potency of any plan is heightened by acting together, AND you avoid distortions that occur when countries go different ways. –experts from both Washington and Britain, Oct. 10 Emergency meeting [NYtimes]
 * countries can maximize the punch of their actions **

You don’t want the beggar-thy-neighbor policies that characterized [|the Great Depression]. Unilateral acts “have to be avoided, if not condemned.” - [|Dominique Strauss-Kahn], managing director of the International Monetary Fund
 * Acting on own could destabilize the financial systems of neighbors. **

<span style="font-size: 12pt; color: black; line-height: 115%; font-family: 'Times New Roman','serif';">European states must each take responsibility at a national level for the banking crisis, without harming other European states. "It is important to act in a balanced way, and for countries not to cause harm to each other." - Angela Merkel, the German chancellor <span style="font-size: 12pt; color: black; line-height: 115%; font-family: 'Times New Roman','serif';"> -  ** Case Study: ** Ireland is being criticized by Germany, Britain and other European Union members for acting on its own last week to guarantee all bank deposits in that country, saying that this gave Ireland’s banks an unfair competitive advantage and forced other countries to adopt similar measures to prevent funds from moving to Ireland.

"The Irish method is unsuitable because it put its own financial institutions under a protective umbrella but failed to include other international financial institutions, which paid taxes over a long period in Ireland. [Washington post]

<span style="font-size: 12pt; font-family: 'Times New Roman','serif';">EU is well placed to play an active role in designing new global structures <span style="font-size: 12pt; font-family: 'Times New Roman','serif';">and ensuring that they are transparent and accountable and that developing <span style="font-size: 12pt; font-family: 'Times New Roman','serif';">countries as well as others are represented. <span style="font-size: 10pt; font-family: 'Times New Roman','serif';">Having a centralized regulator would have the additional advantage of making it easier for the European Central Bank to fulfill its role in addressing systemic risks. - [financialcrisisupdate.com] <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; line-height: 115%; font-family: 'Times New Roman','serif';">[ACCA, global body for professional accountants.] <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> **__<span style="font-size: 18pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">Global Economic Stim. Plans - Arguments Against __** <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-family: 'Times New Roman','serif'; mso-fareast-font-family: 'Times New Roman';"> -  <span style="font-family: 'Times New Roman','serif';">moral hazard created by a public safety net of central bank lending and government bailouts = inevitable to contain systemic risk. [financialcrisisupdate.com] <span style="font-family: 'Times New Roman','serif'; mso-fareast-font-family: 'Times New Roman';"> -  <span style="color: #333333; font-family: 'Times New Roman','serif';">all centrally planned incentive systems degrade over time. That is, over time, regulated institutions will find weaknesses in the system and come up with ways to maximize risk within the letter of the law. [Library of Economics and Liberty website, econlog.econlib.org] <span style="font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';">The so-called Bretton Woods institutions, the World Bank and the International Monetary Fund, have proved insufficient at spotting, preventing or controlling global financial crises, especially <span style="font-size: 12pt; line-height: 115%; font-family: 'Times New Roman','serif';">the current one. <span style="font-size: 14pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;"> <span style="color: black; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 9.0pt; mso-bidi-font-style: italic;">Since the recession began, an estimated 4 million additional Americans have lost their health insurance and 2 million have become uninsured. The recent turmoil in the job market is likely increasing the number of uninsured at the rate of 14,000 a day. And yet, congressional conservatives opposed efforts to stop the erosion of our health care system and help millions of Americans hold on to the coverage they have or get it for the first time. <span style="font-size: 10pt; color: black; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 9.0pt; mso-bidi-font-style: italic;"> <span style="font-size: 12pt; font-family: 'Times New Roman','serif';">In areas such as accounting, being too prescriptive with global measures could backfire. Issuing guidance that results in mechanical rule following would be a recipe for disaster. Principles-based standard setting and professional judgement have a vital role to play and should not stifle recovery. <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> - **Case in point – nations differ and must act on their own:** Germany, Britain and other European Union members are criticizing Ireland for acting on its own last week to guarantee all bank deposits in that country, saying that this gave Ireland’s banks an unfair competitive advantage and forced other countries to adopt similar measures to prevent funds from moving to Ireland.
 * <span style="font-size: 16pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">Opportunity to shape new global governance around progressive values. **<span style="font-size: 12pt; font-family: 'Times New Roman','serif';">
 * <span style="font-size: 16pt; line-height: 115%; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 10.0pt;">Central Banking = bad **
 * <span style="font-size: 16pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">Can’t trust global institutions to find the problems or to solve them **
 * <span style="font-size: 14pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">We shouldn’t have to end up bailing out our neighbors. We want to bail out our own. **
 * <span style="font-size: 16pt; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">Problems are global, financial regulation is national. **

But the Irish finance minister, [|Brian Lenihan], told reporters at the Luxembourg meeting that his government had no choice but to act quickly. "There is not enough liquidity in the market," he said, according to the [|Associated Press]. "That's a problem we have to address." [Washington post] <span style="font-size: 12pt; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; line-height: 115%; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; line-height: 115%; font-family: 'Times New Roman','serif';"> <span style="font-size: 12pt; line-height: 115%; font-family: 'Times New Roman','serif';">
 * <span style="font-size: 14pt; color: black; line-height: 115%; font-family: 'Times New Roman','serif'; mso-bidi-font-size: 12.0pt;">European leaders are not "going to save the world" **<span style="font-size: 12pt; color: black; line-height: 115%; font-family: 'Times New Roman','serif';"> - senior Nicolas Sarkozy (French President) aide.