The unfolding financial market meltdown could trigger a massive and prolonged recession that would destroy hundreds of millions of jobs worldwide and wipe out the savings our countless households; as usual, the most vulnerable would be hit hardest.

If economic policymakers continue with their business-asusual behaviour, they risk becoming the authors of the next Great Depression. The time for forceful coordinated action has arrived. Leaders should agree to a plan back it forcefully.

Any global plan must have options as the crisis in Iceland is not the same crisis as in the US or Germany, but coordination is essential to restore confidence. Coordination and dialog is also important to avoid the downward spiral of international cooperation that followed the last great crisis in the 1930s.

This E-book collects essays from some of the world’s leading economists on what governments can do to rescue our jobs and savings. While they differ on many points, a clear consensus emerges on need to act, the need to act cooperatively and on the basic options for action.

The authors are: Alberto Alesina, Michael Burda, Charles Calomiris, Roger Craine, Stijn Claessens, J Bradford DeLong, Douglas Diamond, Barry Eichengreen, Daniel Gros, Luigi Guiso, Anil K Kashyap, Marco Pagano, Avinash Persaud, Richard Portes, Raghuram G Rajan, Guido Tabellini, Angel Ubide, Charles Wyplosz and Klaus Zimmermann.

Visit Rescuing our jobs and savings Download Page

You can download full publication in PDF format.

A VoxEU.org publication
Edited by Barry Eichengreen and Richard Baldwin

Contents
Introduction 1
The G7/8 finance ministers meeting: An opportunity 1
Remarkable consensus: Stabilise the banking system 1
Stabilising the banking system: options 1
The essays: What G7/8 leaders can do to solve the global credit crisis
Coordinating international responses to the crisis 5
Klaus F. Zimmermann
Calming the panic 7
Alberto Alesina and Guido Tabellini
How to save the European banking system 9
Daniel Gros
What is to be done – and by whom? Five separate Intiatives 11
Avinash Persaud
What next? 13
Douglas W. Diamond, Anil K Kashyap, Raghuram G. Rajan
A strategy emerges: The right policies to deal with the crisis 15
Richard Portes
The need for a comprehensive and global solution 17
Stijn Claessens
The content of coordination 19
Barry Eichengreen
Why government responses need to be comprehensive and coordinated 21
Charles Wyplosz
A proposal to tackle the crisis in Europe 23
Luigi Guiso and Marco Pagano
Governments should buy straightpreferred stock in their banks 25
Charles Calomiris
An efficient rescue plan 27
Roger Craine
The wrong financial crisis 29
J. Bradford DeLong
What Europe should do in the shadow of the financial meltdown 31
Michael Burda
No more dithering 33
Angel Ubide

INTRODUCTION

We are in the throes of what is almost certainly the most serious economic and financial crisis of our lifetimes. The crisis is no longer a US crisis or even a US and European crisis; it is a global crisis. It has spread from Wall Street to Main Street. It is not just investment portfolios and retirement accounts but jobs that are now at risk. There is a need for urgent action. The policy response needs to be decisive. It needs to be global. The stakes could not be higher.

The G7/8 finance ministers meeting: An opportunity
Global economic and financial leaders are convening this weekend in Washington DC for the annual meetings of the IMF and World Bank. G7/8 finance ministers will meet Friday on the sidelines of the Fund/Bank meetings to craft their response. The global financial community will assemble the next day at the IMF headquarters. Unfortunately, it is not clear that they have a clue of what to do.

With this sense of urgency in mind, we have assembled a group of leading economists to offer priorities for crisis response. This is not a homogenous collection of experts. The contributors are from different continents and different schools of thought. Not for the first time, the experts do not entirely agree.

Remarkable consensus: Stabilise the banking system
But, that said, there is a remarkable degree of consensus on what must be done. Policy makers must move boldly to stabilise the financial system. To be sure, there are also other urgent tasks for the future. There must be regulatory reform and, more than that, a fundamental rethinking of the financial architecture to prevent an equally devastating crisis from occurring again. Social programs will need to be ramped up to provide assistance to the innocent victims of the crisis.

The damage done to pensions, retirement accounts, and the housing market will need to be repaired. But these are tasks for tomorrow. Today, the contributors to this volume agree, the urgent task is to contain the panic and staunch the bleeding in the financial system. ...

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