What are the longer-term effects of the financial crisis?
Mehra says that the financial crisis has not yet spilled over significantly into the real economy. “But we must act rapidly to ensure that it doesn’t,” he said. The danger, he said, is that businesses rely on bank loans to finance new productive investments, and when they can’t get these loans because the credit markets are frozen, they can’t grow — and that has a negative effect on real economic performance. Bonadurer is less optimistic that the financial crisis has not already — or won’t soon — spill over into the real economy. He says that the outlook, in terms of a global recession, is bad no matter what actions governments take. “Global growth is slowing significantly and likely to move below 3 percent, and the IMF suggests that 2.5 percent demarcates a recession,” he said. “We are not there yet.” “During the Great Depression, unemployment was 25 percent; it’s now at 6 percent. Mortgage delinquencies were at 40 percent; they’re now between 4 and 5 percent. The political, econom
