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Jones: Is the world closer to the edge of the ‘fiscal cliff’ today than it was in 2008?

By: /
29 October, 2012

The question is slightly miscast, because in 2008 it wasn’t a fiscal cliff but a financial one – and we fell off, when the U.S. Treasury allowed Lehman to fail. The combination of quantitative easing, TARP, and coordinated expansionist policy by the key G20 members pulled us back onto the ledge.

Now, we face three distinct and reinforcing problems: a fiscal cliff in the U.S. that could trigger a new (but not great) recession; slowdowns in China and India; and the eurozone crisis, which holds the gravest dangers. Even ECB actions arguably pulled us away from the cliff in Europe. Likely, a new recession looms; but probably not a financial implosion à la 2008.

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