17  At 120 per cent for the United States, 130 per cent for Euro area. BIS Review 36/2010  5  In this scenario, there is deficient demand globally. With monetary policy constrained by the zero lower bound, deflation emerges. As a consequence, real interest rates increase sharply, growth stalls, and fiscal consolidation becomes more difficult.
It is cold comfort that global imbalances are effectively eliminated. The cost is a prolonged global recession, with massive foregone output. If this scenario were to occur, the risk of protectionism would undoubtedly rise, potentially exacerbating the damage. Finally, consider a “framework scenario,” one that highlights the large gains that the G-20 process could – and should – produce (Chart 5).