World markets slide on fears of recession in U.S.

The Associated Press

In Brazil, traders were panicking.

Featured Topic | Posted 43 weeks 4 days ago

World markets slide on fears of recession in U.S.

The question of whether the U.S. is in a recession may now be moot. If the stock market across the planet are any indication, the whole world now believes it to be the case.

Is there anything that can stop the economic slide? And will the rest of the world help the U.S. out of its slump -- or come knocking on the door, demanding payment of bills due?

Ben likes: Stimulating talk, redux

George Will/Newsweek

A real recession may have started, although in the fourth quarter of 2007, aggregate hours worked increased, as they did in the third quarter, and oil prices have declined. Economic fears can, however, become self-fulfilling by paralyzing decisions to consume and invest. Often, the wise response to an economic correction is "Don't just do something, stand there," because the market is doing the right things. But corrections provoke political competition to provide relief. And when government "fine-tunes" the economy with "demand management," it responds to economic conditions as they were, not as they have become. The ameliorative measures Congress will legislate, perhaps by March, will be responsive to economic conditions indicated by statistics collected many months before the measures will begin to affect economic behavior, if they do affect it.

Joel likes: Flashing red

The Economist

If the American economy is not now in recession, it is close enough not to make a practical difference to sentiment. For much of past year equity investors could take comfort from three bullish factors. First was that the Federal Reserve would rescue both the markets and the economy, as it has done so often before. Second, even if the American economy faltered, the rest of the world (particularly Asia) could take up the burden of producing global growth. Third, given the global picture, corporate profits could stay high.

All three assumptions are now coming under question.