Global Recession, Here We Come
Remember that scene in Titanic where the ship splits in two, the back end rises up vertically, and then plunges into the freezing ocean? That’s what the world economy is about to do. And just like the passengers on the Titanic, we can see it coming and feel the gradually building momentum, but are powerless to stop it.
The New York Times is now bluntly talking about a global recession (with a similarly apt oceanic metaphor):
When the White House brought out its $700 billion rescue plan two weeks ago, its sheer size was meant to soothe the global financial system, restoring trust and confidence. Three days after the plan was approved, it looks like a pebble tossed into a churning sea.
The crisis that began as a made-in-America subprime lending problem and radiated across the world is now circling back home, where it pummeled stock and credit markets on Monday….
The vertiginous drop in stock markets on both sides of the Atlantic on Monday reflected not only those fears, experts said, but also a growing belief that the crisis could tip the world into a global recession.
The article notes that the usual organizations that help stabilize recessions — the IMF and the Group of 7 — are either too weak today, or lack the true global influence, the latter because China and India are not part of the club. There has been very little global coordination to stem the tide, and even within Europe itself there is an every-country-for-themselves. Heck, Iceland almost went bankrupt today!
Get a tight grip on the handrail, this is going to be a bumpy ride down, followed by a long freeze.