The Economist warns that the recession we just experienced is only a small taste of the pain to come.
While massive government action around the world softened this recession’s blow, to the point that many in the world barely felt it, it will soon be time to deal with the repercussions of bailouts and stimulus.
These include stagnation in developed economies, asset bubbles in emerging ones, and the rise of anti-business sentiment among outraged American and European populations.
The Economist: The bad news is that today’s stability, however welcome, is worryingly fragile, both because global demand is still dependent on government support and because public largesse has papered over old problems while creating new sources of volatility. Property prices are still falling in more places than they are rising, and, as this week’s nationalisation of Austria’s Hypo Group shows, banking stresses still persist. Apparent signs of success, such as American megabanks repaying public capital early (see article), make it easy to forget that the recovery still depends on government support. Strip out the temporary effects of firms’ restocking, and much of the rebound in global demand is thanks to the public purse, from the officially induced investment surge in China to stimulus-prompted spending in America. That is revving recovery in big emerging economies, while only staving off a relapse into recession in much of the rich world.
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