Maybe it was the utter collapse of Iceland's financial system. Maybe it was the worst week in the history of the Dow Industrial Average since those five trading days in the antique October of 1929, or the worst ever for other indices, or the trillions of dollars lost in the bourses around the world. Perhaps the elegant yet urgent intervention by British PM Gordon Brown and Chancellor of the Exchequer Alistair Browning hit the spot for the other six of the G7. Whatever, by the middle of October the global financial system had avoided disintegration.
But averting a global financial meltdown is not the same thing as averting a steep recession. Indeed, David Levy, chairman of the Jerome Levy Forecasting Center, argues that despite the government's unprecedented intervention into financial markets, we're in for a recession concurrent with a depression. A recession is a cyclical event caused by a spasm of overproduction - e.g., millions of newly built and empty homes - while a depression is a macro event caused by prolonged overinvestment leading to structural imbalances - e.g., $55 trillion in credit default swaps.