Over the past decade, Chinese trade revenues, savings and purchases of US debt increased. Low interest rates encouraged US consumers to spend and housing prices soared. But such imbalances could not be sustained and financial instruments containing mortgages for homes that have lost their value, have proven toxic for the world. Economists and central bankers are still struggling to find a way out of the subprime mortgage crisis. If Japan’s lost decade offers lessons, then deflation must be averted at all costs if there is to be hope for a recovery.. But for the long-run, one magical phrase emerges from experts and that’s “stricter regulations for the banking industry.” Once governments succeed in restoring consumer and investor confidence, they should focus on designing regulations that encourage responsibility and a long-term outlook. Furthermore, policymakers have to recognize the need for global oversight of the banking industry, either by strengthening existing institutions or by creating new international authorities. The timing of the rescue is uncertain, and the certainty of its efficacy remains in question. To put the matter in historical perspective, there is still no consensus on whether government spending policies of Franklin D. Roosevelt or increased demand for goods created by Second World War pulled the United States out of the Great Depression. One certainty for this crisis: there are no localized solutions for a problem that extends throughout the world.

Global Bond Rout Deepens on US Fiscal Worries

Rising US spending and debt trouble global investors
Ambrose Evans-Pritchard
December 10, 2010

Why the Financial Crisis and What Is the Way Out

Causes and solutions in dealing with the financial crisis
Carmen Reinhart
October 7, 2010

Taking Harder Stance Toward China, Obama Lines Up Allies

The US-China economic relationship often appears more acrimonious than it really is
Mark Landler, Sewell Chan
November 22, 2010

If You Thought the Bank Bailout Was Bad, Wait Until the Mortgage Defaults Hit Home

A bailout of bondholders calmed international markets, but will lead to mortgage defaults
Morgan Kelly
November 16, 2010

Debt Plan Ideas Draw Scorn of Liberals and Tea Party

Proposal to cut US spending exposes massive debt, igniting anger and debate
Jackie Calmes
November 15, 2010

The G20: Captive in the Prison of Mercantilism

The G20’s failure to take action on coordinating economic policies risks global stability
Ernesto Zedillo
November 13, 2010

US in Asia: Seeking Partners at a Troubled Time – Part II

Obama, more popular in Asia than at home, may find foreign-policy opportunities
Bruce Stokes
November 12, 2010