Infrastructure

Growth Commission Chair Michael Spence was a guest on CNBC's Squawk Box this past week, where he discussed the Fed's recent announcement that it will purchase $300 bn in long term U.S. Treasury Bills, adding to the $750 billion worth of agency backed mortgages it plans to purchase this year. Spence lauded this move by the Fed, and stressed that the key to recovery is to unfreeze the credit markets. Additionally, Spence emphasized the attention that must be paid to making sure that developing countries recover from this crisis.  Inevitably, he said, the western countries will recover, but due to an increased propensity to save, they will not likely drive the same levels of aggregate demand that existed before the crisis. This shortfall will only be made up if recovery in the developing world keeps pace with the industrial countries. To watch the interview, please click here.

On October 10, 2008, Michael Spence, Mohamed El-Erian and Mahmoud Mohieldin discussed the current global imbalances, macro economic global governance, and the impact it will have on the developing world.  Please access the video of the discussion here.

In an opinion piece featured in the Financial Times' The Economists' Forum on October 27th, Michael Spence offers suggestions on how to avoid the deepening of an asset deflation overshoot which has already begun, and will likely get worse if not attended to by leaders in both industrial and developing economies. Key highlights include coordinated actions by the government and private sector to recapitalize banks, direct intervention in housing markets, IMF coordination of reserve surplus countries,  and private corporation stock buy-back programs. Please access the article here.