24/7 Wall St.

The head of the IMF is calling the period that the world is in now and is likely to stay in for some time “The Great Recession”. According to Reuters, he said “The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes.”

That assessment may be correct, but there are a number of factors that could make it wrong.

The issue of whether unemployment could rise to 14% or 15% in the US won’t be known until well into next year. GDP contraction in the American economy could move to 10%. If those things happen, China will fall like a bowling pin as demand for its exports evaporates.

As part of a series of events that would be triggered by a further collapse of the US economy, aid to struggling nations could nearly disappear as developed countries work feverishly on their own troubles.

Or, the US, EU, UK, and China economic stimulus packages could actually take hold in the later part of this year, and the global recession could begin to turn into a recovery. Central banks may have poured enough capital into their financial systems so that there is an improvement in the balance sheets of the large private money center firms, and as a consequence lending to consumers and businesses will to revive.

Giving this economic period a name, which is almost certainly premature, is not going to affect the outcome. It is really only useful to get press.

Douglas A. McIntyre