The most likely outcome is not a V-shaped recovery (which is the current official consensus) or a U-shaped recovery (which is closer to the private sector consensus), but rather an L, in which there is a steep fall and then a struggle to recover. A “lost decade” for the world economy is quite possible. There will be some episodes of incipient recovery, as there were in Japan during the 1990s, but this will prove very hard to sustain.Please note that there's no recovery in 'L', but only a struggle for recovery.
Friday, April 03, 2009
Respected economist Simon Johnson writes on the current economic crisis: