Economists Fear Second Wave of Recession
While the world economy shows signs of gaining strength and the possible end of recession brought on by the subprime credit crisis, there are enough experts that anticipate a new collapse, writes AFP.
The hypothesis that a recession will return after an initial recovery was made by U.S. economist Nouriel Roubini, professor at the University of New York.
Roubini was the among the first economists to identify the U.S. credit crisis which degenerated into a global crisis. He said recently on a forum that the risk of a recession in the second stage is large.
The United States experienced such situation in 1937. When the Federal Reserve cut credit lines, fearing inflation after the Great Depression of 1929, the economy fell a further 3.4%.
“A dual failure would cause an abrupt decrease in activity, and could lead to resumption of protectionism by states due to internal social pressures,” said Eswar Prasad, professor Cornell University.
Opinions on the recession scenario are divided into two camps. While some economists think this hypothesis is possible, others consider it premature to consider a new collapse, given that only a few economies have announced an end of the current recession.