Awash in money and piles of debt

Sun Apr 22, 2012 3:09pm EDT
 
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By Stella Dawson

WASHINGTON (Reuters) - The amount of money thrown at rescuing the world economy since the Great Recession began is truly staggering, probably more than $14 trillion, and the financial spigots are still open.

Industrialized and emerging nations pledged another $430 billion to boost the International Monetary Fund's lending power this weekend, doubling the size of its crisis-fighting war chest in case Europe's problems worsen and engulf more countries.

Three weeks earlier, European Union leaders set aside $1 trillion for Europe's bailout fund creating a firewall to prevent the euro zone's sovereign debt woes from spreading.

Major central banks haven't finished pumping money into the global economy either.

The Federal Reserve meets on Tuesday and Wednesday and the Bank of Japan meets on Friday, and their bias toward monetary easing through bond purchases is likely to remain firmly in place. Japan may even ease again to counter deflationary pressures.

The IMF has recommended more action from the European Central Bank, and the People's Bank of China is seen cutting its bank reserve requirements this year to underpin growth.

But can all this money restore growth to robust levels anytime soon?

Government officials and economists point to the same problem: too much debt. Rescue funds and central bank stimulus measures are just keeping the world economy afloat until the hard and painful work of repairing balance sheets gets done.   Continued...