ABSTRACT
We live in hard times. The 2007/08 financial crisis triggered the most severe global downturn since the Great Depression of the 1930s. During the first 10 months of the Great Recession, economic output, global trade and global equity values all plummeted lower than the first 10 months of the Great Depression (Eichengreen and O’Rourke 2010). The International Monetary Fund (2009) estimated that banks and other financial institutions lost more than US $4,000,000m. in the value of their holdings as a result of the crisis. Private sector analysts (Roxbrough et al. 2011) estimate that the global decline in asset values led to aggregate losses of $27,000,000m. in 2008. In an effort to spend their way out of the downturn, the USA, the European Union and Japan primed their fiscal pumps, saddling themselves with rapidly escalating debt-to-gross domestic product (GDP) ratios. The Pacific Rim economies suffered from drastic reductions in exports, the fuel for their growth engines. The least developed economies saw the immediate withdrawal of private capital flows and the tightening of trade credit. Based on similar downturns in the past, the hard times could last for the rest of this decade (Reinhart and Rogoff 2009; Reinhart and Reinhart 2010; Eichengreen 2011a).
