03.05.09, 12:01 AM EST
There is a grave risk of a global L-shaped depression.
For those who argue that the rate of growth of economic activity is turning positive–that economies are contracting but at a slower rate than in the fourth quarter of 2008–the latest data don’t confirm this relative optimism. In 2008’s fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.
There is, in fact, a rising risk of a global L-shaped depression that would be even worse than the current, painful U-shaped global recession. Here’s why:
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