While the “Great Recession” is over, what has followed is an unfamiliar process of repairing public and private balance sheets across advanced economies. The depth and duration of this deleveraging are unclear. Deleveraging is holding back the global recovery and laying bare distinct challenges in different parts of the world. The euro area is stagnating as it struggles with an underlying balance-of-payments crisis.
The United States is at the edge of a fiscal cliff. China and other emerging markets are trying to sustain rapid growth amid weak demand in their traditional export markets. There is a synchronous slowdown under way in the global economy. This past weekend in Tokyo, when the International Monetary Fund (IMF) marked down its growth forecast, no region or major economy was spared.