CAPITAL: U.S. Is Back From the Precipice
So is it over? Have governments in the U.S. and Europe finally found the cure? Has recession been averted?</br></br>No. We're still in for a rough recession, with U.S. unemployment, now at 6.1%, likely to rise above 8%, with all the misery that brings.</br></br>But it could be worse. For a few scary moments last week, governments began to take action to protect their own countries that made other countries worse off. It looked like the world economy was lurching uncomfortably close to conditions that precipitated the Great Depression. The newfound trans-Atlantic unity -- particularly the move by the U.K., then the rest of Europe and now the U.S., to give the banking system a taxpayer-funded transfusion -- has significantly reduced the odds of a really bad outcome. That alone is reason to be less panicky today than many were this time last week.</br></br>Paul Krugman, the newest Nobel laureate in economics, described in a CNBC interview Tuesday the latest government action as "emergency battlefield medicine to keep the guy from bleeding to death." That's no small accomplishment given how bad the wounds were. If the treatments work as intended, banks should resume lending at least to each other, a necessary step toward recovery.</br></br>The new U.S. plan "is going to boost confidence that the most extreme downside risks have been diminished, but the damage has been done, and this isn't going to prevent the economy from being in recession and remaining weak for a while," Laurence Meyer, an economic forecaster and former Federal Reserve governor, said Tuesday. Exactly.