The global economy is headed into another turbulent period. Whether the United States or the whole world suffers through a recession depends on a number of factors, especially the nimbleness of policymakers. Global deflation has reared its ugly head once again. Europe is unlikely to become a growth locomotive. Japanese growth is faltering.
Turkey is the latest emerging market to suffer through a financial crisis.
Banking systems are stronger now than in the early and mid 1990s. Most important of all, in Europe and the United States there is scope for both fiscal and monetary stimulus. This assessment depends on the willingness and ability of the G7 countries to use both fiscal and monetary policy, quickly and effectively, to counter any further signs of weakness. The outlook for Europe could be even weaker if the euro were to appreciate significantly against the dollar. A weak euro was an important contributing factor to the robust expansion of the euro zone economies.