Bank of Canada warns on fiscal consolidation

photoTORONTO (Reuters) – Austerity drives in wealthier countries could significantly shrink the global economy if not accompanied by increased Asian demand and a stronger Chinese currency, the Bank of Canada said on Tuesday. Model simulations suggest a loss of more than $7 trillion to the world economy by 2017 under such a scenario, said John Murray, deputy governor of the central bank, in a speech. “Fiscal consolidation and the repair of household balance sheets are necessary and inevitable, but doing them quickly, unassisted by growth from elsewhere, deepens global deflation,” Murray said. …