E What Are The Chances For A New Global Recession?

In September 2006, Nouriel Roubini was one of the few economists to correctly predict the arrival of the global economic and financial crisis in 2008-09.

Roubini is once again forecasting the arrival of a global recession that he expects will begin in the US and then spread around the world. In his words, “we are due a recession in 2020 – and we will lack the tools to fight it.”

One difference today, however, is that there is an emerging chorus of many economists and investment experts who confidently think that a US and European, if not a global, recession, is in the cards.

However, there is a big difference between an economic growth slowdown and an outright recession.

In plain words, a global slowdown does not necessarily translate into a serious global recession. Moreover, not all economic recessions are of the same magnitude and they do not all spread equal levels of damage.

A recession is quite different from a 1930s style depression. A recession is normally identified as occurring when real GDP contracts for two or more consecutive quarters.

For example, the last US recession between 2007 and 2009 (the Great Recession) was lengthy, deep and caused significant damage as it spread around the world. It required dramatic fiscal, monetary and financial interventions around the world to ensure that the Great Recession did not turn into a 1930s kind of depression. 

On the other hand, sometimes meeting the narrow definition of a two-quarter economic decline can seem quite meaningless.  

For example, on that basis, Canada was in recession in the first half of 2015, but at the same time, there were none of the typical national economic problems associated with such a mild recession.

According to the NBER, the last major US economic downturn (The Great Recession) began in the fourth quarter of 2007 and lasted eighteen months. As the following table illustrates, it was the longest recession in post-war American history.

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