Richard Wood — To the G-20: It Is Demand Deficiency, Not Supply

The Eurozone countries and Japan are now falling back into recession/depression and deflation, and their public debt levels are grossly excessive, and still rising. The deepening economic crisis in these two large economic blocks could have serious implications for other G-20 countries, as aggregate demand is already weak globally. 

Nonetheless, based on the advice of their officials, G-20 Leaders will soon begin arriving at this month’s G-20 meeting in Australia believing that all monetary and fiscal policy options have been exhausted. Based on that understanding, they will announce around 1000 supply-side structural and infrastructure policies: a display ─ like fireworks ─ that will greatly impress the public. 

However, while microeconomic reform and infrastructure spending have their place, such policies cannot possibly provide the locomotive power needed to sufficiently lift aggregate demand and steer troubled economies to safety.…

Should G-20 Leaders not address demand deficiency directly, they, and their advisers, should never be forgiven.

Economonitor
To the G-20: It Is Demand Deficiency, Not Supply

Richard Wood | former Australian Treasury official, is a guest lecturer at the University of Queensland, Australia