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Capitalist Meltdown

PARIS – There is a strange foreboding in the world economy. Newspapers report downward revisions in growth estimates for all the major developed countries: the United States, Germany, France, Japan. No one, it seems, is being left out. Indeed, these estimates are roughly half a percentage point lower than those issued only last autumn.

At the same time, newspapers report in bleak terms almost exclusively about banks and financial markets, with little attention to the real economy, as if today’s crisis were purely financial and bound to remain so. Indeed, some experts, too, believe that the crisis can be resolved simply by refinancing banks, and that the impact on the real economy will be relatively limited.

This is clearly the belief of the European Central Bank, which is pumping hundreds of billions of euros into the banking system to ensure liquidity. But, unlike the US Federal Reserve, it has not lowered key interest rates, which is what matters most to firms and households.

Other experts, of course, believe that the real economy is in jeopardy, and that the threat of a recession is genuine. But, unfortunately, hardly any experts can speak with confidence about both finance and macroeconomics. So what is a non-expert to think?