*Who’s Your Sugar Daddy?


WHO’S YOUR SUGAR DADDY?….Is the massive U.S. stimulus plan sucking up all the liquidity in the world, preventing developing countries from stimulating their economies? Apparently this is the complaint du jour at Davos, but Daniel Drezner is unimpressed:

To be generous, these complaints are not completely without foundation. They are a little odd, however. If the United States does not engage in greater stimulus, then other countries are going to have to pick up the slack, or this recession will last a long time. Indeed, count me in the Martin Wolf/Brad Setser camp of those who would love to see other countries — *cough* China, *cough* — starting to boost their own consumption as a means for igniting global growth, because that would also help to redress the macroeconomic imbalances that are at the heart of the current predicament.

To date, however, the efforts by most of these other countries have been underwhelming. [What about China?–ed. Their stimulus has targeted investment rather than personal consumption, so yes, them too.] If I were Obama, I wouldn’t trust other countries to provide the locomotive power necessary to get the global economy moving again. So I don’t see how they can blame the United States for doing what they are choosing not to do.

Agreed. But we still need a long-term plan to address those macroeconomic imbalances eventually.

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