The US and global economies are in recession but this will not deteriorate into a depression, according to leading US economist Richard Hoey.
Hoey, the chief economist of Bank of New York Mellon Corporation, has used his latest economic update to declare “after a half-decade of probably the fastest pace of global economic growth in the history of the world, we are now in a US recession, a G-7 recession and a global recession, all of which should be among the most severe of the postwar period”.
Hoey said he was expecting a sharp global decline, with the most intense weakness in late 2008 and early 2009, as a global financial crisis and inventory correction are occurring simultaneously in many countries.
However, looking at the broader picture, he said while fears that asset deflation and a serious financial crisis could trigger a depression have increased, this reflected a severe global recession and he was confident a depression could be avoided.
“The reason depression occurred in the 1930s was a misdiagnosis of the economic risks and a set of counterproductive policies which resulted from that misdiagnosis,” Hoey said. “Today, in contrast, we believe that the economic diagnosis and the policy response are correct.”
