The probability is growing that the global economy — not just the United States — will experience a serious recession. Recent developments suggest that all Group of Seven economies are already in recession or are close to tipping into one. Other advanced economies or emerging markets (the rest of the euro zone; New Zealand, Iceland, Estonia, Latvia and some Southeast European economies) are also nearing a recessionary hard landing.

When they reach it, there will be a sharp slowdown in the BRICs (Brazil, Russia, India and China) and other emerging markets.

This looming global recession is being fed by several factors: the collapse of housing bubbles in the U.S., Britain, Spain, Ireland and other euro-zone members; punctured credit bubbles where money and credit was too easy for too long; the severe credit and liquidity crunch following the U.S. mortgage crisis; the negative wealth and investment effects of falling stock markets (already down by more than 20 percent globally); the global effects via trade links of the recession in the U.S. (which still counts for about 30 percent of global GDP); the U.S. dollar's weakness, which reduces American trading partners' competitiveness; and the stagflationary effects of high oil and commodity prices, which are forcing central banks to increase interest rates to fight inflation at a time when there are severe downside risks to growth and financial stability.