The global economy is not in serious danger

                                                                    

In modern economic history, the financial crisis of 2007-2008, also known as the Great Recession, is second only to the Great Depression of the 1930s in both severity, scope and depth. It ended the so-called period of Great Moderation (i.e. the prolonged stability in the global economy that began in mid-1980s), and proved to be impervious to the conventional tools of fine-tuning that policy makers were accustomed to. It was tamed only by the extraordinary and bold actions of the major economies.

But the global economy is making a rebound. An upsurge in economic activity is underway and "for the first time since a brief rebound in 2010, all the burners are firing at once", the Economist wrote. Despite some daunting challenges, the Economist noted, global economy is showing good signs of resilience as growth in US economy is gathering momentum, capital expenditure is at the highest level in Japan in three years, fear over Chinese meltdown and devaluations is waning, stability is taking over Europe, while other emerging economies have been showing modest growth.

The question is: who will take the credit for this recent economic recovery? What are the long-term political consequences of this recovery? This week's edition of the Economist has the right answers. I highly recommend that you read it. The global economy does not seem to be in serious danger. This is contrary to what Harvard economist Lawrence Summers forcefully wrote on Washington Post column many months ago. But it does seem to be recovering at the "wrong time", so to speak.