The Baseline Scenario, 2nd Edition
Our weekly baseline scenario is divided into three parts: updates since last week; our analysis of the current situation; and our policy proposals. First-time readers should begin with the analysis and continue with the proposals; returning readers may want to just read the updates and the proposals. (Or download the complete baseline in PDF.)
Despite what seemed at times to be a week filled with news, we think events remain track within our Baseline Scenario from last week. A big global contraction of credit is underway and a severe recession is in the cards almost everywhere. Governments continue to respond too slowly and too partially to this. Europe in particular remains largely in denial (amazing though that may seem after 10 days of bank failures).
Overall, however, our message remains reassuring. Policy can turn the situation around quickly, if it is applied in a decisive manner (see our policy proposals). We are optimistic that political leaders will eventually rise to the occasion.
You have probably heard the term, “Living on Internet Time,” which means to experience life at a hectic pace. I’m afraid we are now living on Financial Market Time, which is like Internet Time, but with teeth. It would be better if political leaders could step up sooner rather than later.
