[Peace-discuss] cost of worldwide financial epiphany about 12 trillion

[C. G. Estabrook]

[The article Wayne quotes is from the Daily Telegraph (UK) -- sometimes called 
the "Torygraph" -- but here's how the BBC played what appears to be the same 
reports from the IMF.  --CGE]

	'$10 trillion' credit crunch cost
	By Steve Schifferes
	Economics reporter, BBC News

A protester on Wall Street complains about US government bail-outs
Government bank bail-outs have been controversial in the US

The global credit crunch has cost governments more than $10 trillion, the 
International Monetary Fund (IMF) says.

The IMF says that rich countries have provided $9.2tn in government support for 
the financial sector, while emerging economies spent $1.6 tn.

About $1.9tn represents up-front expenditure, while the rest is made up of 
guarantees and loans.

Governments are likely to recover most of these sums when the world economy 
recovers, but big deficits will stay.

The financial bail-out costs include:

     * Capital injections: $1.1tn
     * Purchase of assets: $1.9tn
     * Guarantees: $4.6tn
     * Liquidity provision: $2.5tn

Budget gaps

The IMF has also been revising its estimates of the cost of the global downturn 
on government budgets.

It now says that overall, the rich countries of the G20 group will suffer a 
budget deficit of 10.2% of economic output or gross domestic product (GDP) in 
2009, the largest for most countries since World War II.

The largest projected budget deficits are in the US, with 13.5% of GDP, the UK, 
with 11.6%, and Japan 10.3%.

However, the UK will have the largest projected budget deficit of all G20 
countries by 2010, at 13.3% of GDP, compared to 9.7% for the US.

Fiscal boost

The rising budget deficits have been caused by a combination of the severe 
global economic downturn, which has slashed government revenues, and the 
stimulus measures introduced by some governments to try and kick-start the recovery.

The IMF estimates that the G20 countries will implement stimulus plans worth 2% 
of their GDP in 2009, and 1.6% in 2010 - but it says it is difficult to measure 
how effectively these have actually been implemented.

However, it says that such plans have had a big effect on limiting the severity 
of the recession.

It estimates that such spending has boosted growth in G20 countries by between 
1.2% and 4.7% this year.

The IMF says increased spending is more effective than cutting taxes in boosting 
demand, and works best when implemented in conjunction with looser monetary 
policy and in a coordinated fashion around the world.

Long-term damage

The IMF estimates - prepared ahead of the G20 summit of world leaders in 
Pittsburgh in September - also show how much long-term damage the crisis is 
doing to public finances.

It estimates that by 2014, government debt will reach 239% of GDP in Japan, 132% 
in Italy, 112% in the US, and 99.7% in the UK.

Proportionately, however, the rise in the UK is the biggest - with debt more 
than doubling from 44% in 2007.

Rating agencies have recently warned that a UK debt of 100% of GDP would force 
them to consider downgrading the credit rating of UK government bonds.

This could make it more costly for the government to raise money.

The IMF says that it is important for governments to show a credible path for 
reducing deficits in the long-run, although it urges them to continue the fiscal 
stimulus in the short-term.

A "lack of policy credibility (either real or perceived)" makes fiscal expansion 
less effective by raising risk and raising real interest rates.

G20 leaders are set to discuss the state of the world economy at their next 
summit in September, and look at the effectiveness of measures to revive the 
economy and regulate the banking sector.



ewj at pigs.ag wrote:
> IMF puts total cost of crisis at £7.1 trillion
> The cost of mopping up after the world financial crisis has come to
> $11.9 trillion (£7.12 trillion) − enough to finance a £1,779
> handout for every man, woman and child on the planet.
>  
> By Edmund Conway
> Published: 10:01PM BST 08 Aug 2009
> 
> The staggering total is is equivalent to around a fifth of the entire
> globe's annual economic output and includes capital injections pumped
> into banks in order to prevent them from collapse, the cost of soaking
> up so-called toxic assets, guarantees over debt and liquidity support
> from central banks. Although much of the total may never be called on,
> the potential outlay still dwarfs any previous repair bill for the
> global economy.
> 
> The IMF calculations, produced ahead of the two-year anniversary of the
> crisis, underline the continually mounting cost. Most of the cash has
> been handed over by developed countries, for whom the bill has been
> $10.2 trillion, while developing countries have spent only $1.7 trillion
> − the majority of which is in central bank liquidity support for
> their stuttering financial sectors.
> 
> The IMF figures also show that Britain has been the biggest of all the
> spenders on emergency measures to support its financial sector, with its
> total bill for the clean-up amounting to 81.8pc of its gross domestic
> product − equivalent to £1,227bn.
> 
> Britain's record bill is also unique in that it has also already spent
> much of it already, with 20pc of GDP having already supported struggling
> institutions.
> 
> The countries that make up the G20 grouping will face a combined budget
> deficit of 10.2pc of GDP in 2009 − the biggest since the Second
> World War. Although the biggest will be faced by the US, with 13.5pc of
> GDP, Britain also faces an 11.6pc deficit and Japan a 10.3pc one.
> 
> 
> 
> ------------------------------------------------------------------------
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