Monday, June 29, 2009

Bank of International Settlements: Politics Greatest Threat to Sustained Recovery

The Bank for International Settlements released it's annual report today, largely providing us all with the familiar narrative concerning the economic imbalances and other events which ultimately led us to the sad state of today. The BIS report did however include some rather useful statements(this is the only section we've included below) about what it perceives to be the major risks going forward, namely:

"Fiscal policy is at serious risk of overshooting even in the economies with the most room for debt expansion. A fundamental reason is that, while the programmes most likely to be highly effective and low risk are timely, targeted and temporary, those attributes of fiscal action are notoriously rare in representative democracies."

and yet again:

"And once the recovery materialises, how can central banks begin to tighten policy interest rates and unwind their vast monetary interventions? The technical issues are much less challenging than the political ones."

The message seems to be clear, and it is one that we have furthered on numerous occasions: Politically motivated actions, whether emanating from Washington or the various other global political power centers, pose the greatest risk to a recovery at the present time.

Bank for International Settlements 2009 Annual Report Sphere: Related Content

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