Fred Bergsten, DirectorInstitute for International Economics--------------------------------------------------------------------------------Op-ed for the Los Angeles TimesSyndicate International September 2001 2001 Institute for International Economics As the United States forges an international military and political coalition to counter the heinous attacks of September 11, it is equally important to mount a coordinated response to the economic dimension of the crisis. Acceptance of a financial meltdown or global recession would represent as great a defeat as a failure to punish the perpetrators of the bombing itself and their protectors.The case for a multilateral economic strategy is compelling. Even prior to the attacks, the world was experiencing its first synchronized turndown in decades. Growth had slowed sharply almost everywhere and turned negative in a number of countries. There was genuine risk of a global recession and the latest, pre-attack US data underscore that possibility here.The terrorist actions will depress economic activity further for at least a while. More importantly, the shock to confidence could lead American and other consumers into more cautious spending patterns for months or even longer. A worldwide downturn is all too possible. A synchronized policy response is thus required. The key central banks have already taken the first essential steps by pumping sizable amounts of liquidity into the markets to prevent cash shortages that could disrupt commerce, and by making initial cuts in interest rates. The OPEC countries have also made a major contribution by announcing that they will maintain oil production at levels that will avoid exacerbating the problem. Much more is needed, however.The next move should be a further, coordinated reduction in interest rates by the central banks, especially our own Federal Reserve and the European Central Bank that manages the euro. (The Bank of Japan's interest rates...
