Yet faced with the deepest slump since the Great Depression, politicians in many advanced economies feel powerless: they have discovered that many of the most powerful tools to alter the distribution of resources power over interest rates, exchange rates, trade andfiscalpolicy, and the banking system are placed beyond their reach.
Suppose then that Japan does what it should spurring demand with monetary andfiscalpolicy, cleaning up the banking mess and vigorously pursuing reform elsewhere in the economy will that be enough to make the world economy a safe place?
The global financial crisis of 2008-09 spurred a brief recession in Israel, but the country entered the crisis with solid fundamentals - following years of prudent fiscalpolicyand a resilient banking sector.