Major stimulatory packages were outlined on both sides of the Atlantic overnight.
They were overshadowed though by the Citigroup bailout, which sparked a solid rebound in markets across the board.
In the US president-elect Obama introduced his new economic team, lead by Treasury secretary nominee Timothy Geithner and Lawrence Summers, the putative head of the National Economic Council, whose importance will grow in the new administration after being shoved into the background by the Bush mob.
He scheduled another press conference for tonight to reveal more details of his economics team
He said he would also present more details of a planned stimulus package that some reports said could top 700 billion US dollars.
The package should be the first order of business for the new Congress in January.
"It is going to be of a size and scope that is necessary to get this economy back on track. I don’t want to get into numbers now," Obama said overnight.
"I think the most important thing to recognize is that we have a consensus, which is rare, between conservative economists and liberal economists, that we need a big stimulus package that will jolt the economy back into shape."
In the UK the Government of PM Gordon Brown outlined a 20 billion pound, $A46 billion stimulus package for the slumping economy.
A combination of the Citigroup announcement and the spending package saw UK markets surge:
London’s FTSE 100 had its biggest-ever one-day percentage gain overnight, lifted by the US government’s bail-out of Citigroup and surging markets on Wall Street.
At the close, the FTSE 100 was 372 points higher at 4,152.96, a bounce of 9.8% – the biggest single-session percentage gain the index has seen in its 24 years.
The announcements will be important, not only for the UK and the US, but for global confidence next year and into 2010.
In a weekend radio address, President-elect Obama revealed the outlines of a sweeping program aimed at creating or saving 2.5m jobs by January 2011 through investment in infrastructure, public services and “green” technology.
He continued to sell his ideas overnight in confirming the leaders of his economic team, with several high-powered appointments to the White House.
Their first tasks will be the bailout and the stimulus package. Both will be all consuming.
Democratic Party officials indicated the package will be big, not small.
David Axelrod, Mr Obama’s chief political adviser, said passing a massive economic stimulus package would be the president-elect’s top priority when he took office in January.
He told Fox News on Sunday; “Our hope is that the new Congress begins work on this as soon as they take office in early January.”
Austan Goolsbee, a senior economic adviser to Mr Obama, confirmed the plan would be significantly bigger than the $US175 billion package proposed during the presidential campaign because the state of the US had worsened since then.
And Senator Chuck Schumer predicted it could be as much as $US500 billion-$US700 billion, almost as big as the bailout package of the Bush Administration.
To give the estimate some context, the Bush Administration pushed a $US160 billion tax rebate for individual and corporate taxpayers through Congress. It came and went as it was consumed by the downturn from May to July.
Republicans are already moaning about the size, but with the likes of Goldman Sachs estimating that the US economy is contracting at an annualised 5% at the moment, and will continue contracting well into 2009, size should not be a concern.
Across the Atlantic the UK economy is already a basket case and after the $US37 billion bank support package and guarantee, the Government of Prime Minister Gordon Brown outlines its stimulus package.
In fact it’s what’s known as a "pre-budget’ report and it will total around $A38 billion, or 3 times our $A10.4 billion package that is already in the market and helping first home buyers, and which expands on December 8.
The UK Chancellor, Alistair Darling is in the hot seat.
A year ago he was grappling with the failure of Northern Rock and growing worries about other leading UK banks and mortgage loans. Now it’s a huge tax-cutting and spending package.
He said overnight: "These are extraordinarily challenging times for the global economy.”
He downgraded the UK’s 2008 forecast for growth to 0.75%, while next year growth is estimated to fall by between 0.75% and 1.25%. Growth in 2010 would recover to between 1.5%- 2%.
Government Borrowing would rise to 78 billion pounds (around $A180 billion) this year and then 118 billion pounds (around $A230 billion) in 2009-10, and would only fall to the level of net investment by 2015-16.
Public sector net debt would surge above the current limit of 40% of national income this year, reaching 57% by 2013-14.
The Government argued that without the package, the already nasty slump will become a severe recession, with a surge in misery and unemployment.
Predictably the UK Conservative opposition attacked the package, but so far hasn’t put forward a policy of its own.
The UK is due to go to the polls in 2010, so the Brown Government’s package does have an element of pre-poll priming, but then the Conservative Party’s view should be seen in that context, and the fact that its once huge lead in opinion polls has narrowed in the past month.
