Barry Eichengreen and I have posted an update to our column comparing the current global economic crisis with the Great Depression. The data are through the end of March (apart from the discount rate data, which are through the end of April). Further updates will be posted as the industrial output and trade data are processed by the international organisations which we are using as our source.
At the global level, March saw green shoots in the stock market, but not in the real economy — although world trade stabilised, and there was a clear deceleration in the rate of decline of world industrial output.
We are also, for the first time, posting data on individual countries. These emphasise the gravity of the current crisis. They also show green shoots in some countries, particularly in Eastern Europe and Japan. Hopefully subsequent numbers will confirm these encouraging signs.
Is this the end of the beginning, or a lull between storms? Hopefully the former, but how can one be certain, especially given the various unexploded landmines littering the economic landscape, and the steady increase in unemployment around the world with its potential to create new holes in the financial sector? The Great Depression also saw increases in output which turned out to be temporary, largely due to the policy mistakes of central bankers and politicians trapped by a gold standard mentality. As my column with Barry pointed out, the policy response has been much better this time around, and may be bearing fruit. Once the recovery is clearly under way, governments will need to start balancing the books. But a premature tightening of fiscal policy would be disastrous, which is why Europe needs to avoid artificial fiscal straitjackets.