Unless the leading industrial countries get their act together and pursue compatible economic policies, the world economy may be threatened by 1930s-style competitive devaluation and an outbreak of protectionism.
This warning comes from the Bank for International Settlements (BIS), one of the world's most prestigious international financial institutions.

In its authoritative annual report, the BIS warns that: 'The global economy faces a fundamental dilemma, which is becoming more acute with time. How can imbalances in growth and external accounts across the major economic regions be resolved while maintaining robust global growth overall?'

The bank suggests that the rest of the world has been far too dependent on the economic stimulus provided by the United States and that the ongoing decline in the dollar is going to make life much more difficult for Europe and Japan.

The report warns that unless other countries supplement fashionable 'structural reforms' [neo-lib- low growth, low inflation] with 'more expansionary demand management policies' [keynesian- give workers money to buy (their) products] there must be a question mark over 'whether domestic demand will expand elsewhere, notably in continental Europe and Japan, after a long period of weakness'

Sinking US dollar 'could drag world under'