Last week I laid out my reasons for my prediction of a U.S. recession in 2012. It elicited a variety of questions and comments from readers that merit a response.
-- Global context: One reader objected to my focus on the U.S. alone: "There is no longer an American economy -- only a world economy. The world economy is very unstable and will continue to be so into the foreseeable future. The U.S. has almost no available policy defenses against this instability, so any progress we make on the jobs and income fronts will sooner or later (mostly sooner) be undone by destabilizing global happenings and global geopolitical competition."
This is a valid point. The series covered the U.S. economy, but I have written extensively about the other major world markets in my monthly newsletter, "Insight,"
My thinking is as follows: Europe is in a recession that could be as severe as the one in 2008-2009 in which real gross domestic product in the euro area fell 5.4 percent from peak to trough, almost matching the U.S. decline of 5.5 percent. The continuing, unresolved --- and probably unsolvable -- financial crisis has again spilled over into the real economy. Read more......