It may not be another Great Depression, but leading economists agree the current downturn is indeed a Great Recession. Nouriel Roubini, professor of economics and international business at New York University, Kenneth Rogoff, professor of economics and public policy at Harvard University, and Nariman Behravesh, chief economist and executive vice president for IHS Global Insight held a panel discussion recently that is now available for public view at www.cera.com.
Describing the current recession as a "once in a 50-year event," Rogoff told panelists, "I'm 'constructive' about 2010 in that we'll have tepid growth in the world economy. It's unusual for a recession to last more than two years. However, it will be very slow coming out of it. The big growth will be in some of the emerging markets. It's the developed countries where the biggest hurt is occurring."
Rogoff said nothing will get better unless the banking crisis is solved. Even Obama's $790 billion stimulus is temporary unless "proper decisive action with the banks" is taken.
Roubini agreed. "Even if we have positive growth next year, say one percent, it's going to feel like a recession even if we're out of it. If we don't get the monetary part right, the fiscal policy right, if we don't fix the banking system the right way, if we don't deal with the debt burden of the household sector I see a one-third possibility of (an extended) L-shaped Japanese stagnation."
However Behravesh had a different view. "This is the Great Recession, not the Great Depression 2.0 and not Japan in the last decade," he said. "We're seeing a different policy response than what we saw during the Depression and Japan in the 1990s. It took Japan seven years to deal with its banking crisis. The U.S. has moved in a matter of months and it's had some fiscal effect. Our fiscal stimulus may not be enough or the right kind, but it's much different than the Depression or Japan."