The global economic crisis is not over, said Harvard University professors Kenneth Rogoff and Niall Ferguson, challenging the G20 group of wealthy countries' assumptions that the world is on the road to recovery.
Public spending in the form of bailouts and stimulus packages will create a debt burden for the world's governments, the two professors told Bloomberg.
“The financial crisis may eventually morph into a government-debt crisis,” says Rogoff, former chief economist at the International Monetary Fund.
G20 leaders have pledged to strengthen regulations so governments in the future can prevent such a crisis from occurring again while stimulating their respective economies to grow again.
Still, recovery takes time.
“Major financial crises worthy of the name depression or indeed recession, last significantly longer than a day and they can be measured more in the thousands of days. I think it would be very unwise to say it’s over,” says Ferguson.
“Within our lifetimes the United States will cease to be the world’s largest economy.”
G20 Finance Ministers recently met in Scotland to discuss ways to keep the global economy on the mend, and they decided to stick with stimulus packages, although the minster said it was time to study ways of yanking public aid out of the private economy.
“While we will continue to provide support for the economy until the recovery is secured, we also commit to develop further strategies for managing the withdrawal from our extraordinary macroeconomic and financial support measures,” the G20 ministers said in a statement, according to Reuters.
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