The Shape of America’s Recession
NEW YORK – Now that it is clear that the United States is in recession, the debate has moved on to whether it will be short and shallow or long and deep – a question that is as important for the rest of the world as it is for the US.
The answer depends on the shape of the US recession: if it is short and shallow, sufficient growth elsewhere will ensure only a slight global slowdown. But if the US recession is long and severe, the result could be outright recession in some countries (the United Kingdom, Spain, Ireland, Italy, and Japan), and even financial crises in vulnerable emerging-market economies.
In principle, the US recession could end up being shaped like a V, U, W, or L. Which of these four scenarios is most likely?