# Interesting article from the economist



## Shane Baker (2 September 2007)

http://a330.g.akamai.net/7/330/2582...hics.eiu.com/upload/Heading for the rocks.pdf

Thought this might provoke some interesting discussion.

Cheers

Shane


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## Julia (2 September 2007)

Shane,

Being basically lazy, before I attempt to plough through 42 pages, perhaps you'd like to give us a summary of the article and why you found it useful?


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## Garpal Gumnut (2 September 2007)

Shane Baker said:


> http://a330.g.akamai.net/7/330/2582...hics.eiu.com/upload/Heading for the rocks.pdf
> 
> Thought this might provoke some interesting discussion.
> 
> ...




Shane there are many static figures in this article which depend on everyone sitting down quietly together and letting the whole world economy go to crap in a nice orderly manner. 

Life is chaotic and at this very moment somebody in India,Russia, Ireland or China is probably scheming to add more chaos to all our economies, to reignite trade and money movement. If it does go bust it won't be according to the scenario in this article.

My guess is that we'll recover and continue to boom. Long live chaos theory.

Garpal


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## Shane Baker (3 September 2007)

Hi Julia

The article covers the following for all the major economic regions.

_The main risk to the world economy is a deflationary spiral in asset 
prices.The tremors in financial markets have gone far beyond their beginnings in the US subprime mortgage sector, and indeed far beyond the borders of the US. The full impact on the markets, and the repercussions on the global economy, remains unclear, but we can sketch out three broad scenarios:

•  Scenario 1. The Economist Intelligence Unit's central forecast, to which we attach a probability of 60%, sees the impact being contained by timely monetary policy action, with only a modest effect on the global economy.

•  Scenario 2. Our main risk scenario, with a 30% probability, envisages the
US falling into recession, with substantial fallout in the rest of the world.

•  Scenario 3. Should the US enter recession, another, darker scenario arises:
that corrective action fails, and severe economic repercussions cascade from the US into the world economy with devastating effect. We attach only a 10% probability to this outcome, but the potential impact is so severe that it warrants careful consideration. Since scenario 1 informs our regular output and scenario 3 has a low probability, the bulk of this report focuses on scenario 2._


Garpal

Thanks for your thoughts.


Cheers

Shane


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