“It’s a very serious situation for all of North America and for the entire world,” Canadian Finance Minister Jim Flaherty told Bloomberg Television Thursday at the annual meeting of the International Monetary Fund. “It means we’ll all go into recession. So it’s important this gets dealt with.”

The U.S. will incur $100 billion in automatic spending cuts and more than $500 billion in expiring tax cuts in January, unless lawmakers strike a deal. The IMF this week said that such a consolidation would tighten fiscal policy by 4 percent of gross domestic product, the most since the 1940s.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

The effect would ricochet around the world economy as a recovery from the 2009 recession already shows signs of weakening as the European debt crisis persists and emerging markets slow, said Barry Eichengreen, a professor at the University of California, Berkeley.

“We’re in a potentially deflationary environment almost everywhere,” he said in Tokyo. ‘More inflationary policies are what the U.S. needs, what Europe needs, what Japan needs.”

Failure ’Unacceptable’

Failure to craft a solution “is not acceptable at all,” Bank of America Corp. Chief Executive Officer Brian T. Moynihan said in an interview in Tokyo. “It’s important that it’s done sooner rather than later. We’ve been feeling it since last summer — to take that uncertainty away is key.”

U.S. Treasury Secretary Timothy Geithner said Thursday he agreed delay is not a “responsible” strategy and that any pact should allow for deficit reduction over time and open up room for shorter-term investment.

“We’re going to take a run at it,” he said.

The Federal Reserve also faced another round of criticism from Brazil for embarking upon another round of asset purchases. Finance Minister Guido Mantega said such a policy is “selfish” because it hurts emerging markets such as his by subjecting them to volatile capital flows and currency movements.

“Brazil, for one, will take whatever measures it deems necessary to avoid the detrimental effects of these spillovers,” he said.

Election Season

With next month’s presidential election capturing the attention of U.S. politicians, a bipartisan group of senators met this week to debate ways to reach a long-term deficit- reduction agreement. President Barack Obama has said he wants to allow scheduled tax increases on the wealthy. Republican challenger Mitt Romney opposes any rise.

“At present, the U.S. has a lot of credibility, the U.S. government has a lot of credibility, the fiscal account doesn’t yet suffer from this correction, but this will not last forever,” Carlo Cottarelli, the IMF’s director of fiscal affairs said on Oct. 9. “So there is a need for a plan.”

Bundesbank President Jens Weidmann listed the fiscal cliff as among the reasons for the global economy being “in a difficult situation.”

Some signaled confidence that lawmakers will reach agreement. South Korea Finance Minister Bahk Jae Wan expressed “irresponsible optimism,” while World Bank President Jim Yong Kim said he’s “optimistic.”

“This is a real test of leadership for legislators in U.S.,” Kim said to Bloomberg Television. “After this election is over, it’s very important that they take positive steps.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown