Posted on 01/02/2009 4:23:14 AM PST by TigerLikesRooster
Estimating US GDP decreases, unemployment rates & equity price drops based on what we experienced in the 1930s and what was experienced by Malasia, Indonesia & Philipines is a little of a stretch - our economic, social & political worlds are much different. Prob better to estimate based on what the industrialised & technological world (mostly western world + Japan) has experienced since the early 1970s, plus weighting more strongly for US experience in the 1970s & early 80s, and for Japan’s experience in the 90s (b/c that’s the closest parallel as far as how the crisis started).
I don’t have the numbers, but that seems to suggest that GDP contraction & unemployment not be as extreme as suggested here, but that instead tha duration of the economic and stock market slump msy be much longer and the public debt growth much higher than expected based on this analysis.
This is the best case we can see realistically. Long period of stagnation overburdened by huge debt. This situation runs the risk of becoming permanent, if there is no unexpected external shock(e.g., war, natural disaster, pandemic, or political turmoil.)
Since worldwide nature of current crisis, this kind of stagnation cannot last for long. Unlike Japan in 90's, though, there is no other countries in the world which can pick up the slack and work as cushion to absorb any unexpected negative economic problems.
So the best case(in the near-to-mid term) would be that we may stabilize the situation, albeit at very undesirable level, at the expense of killing long-term recovery momentum.
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