Economists issue the “D Word” on global economy

The possibility of a global depression is now being floated in economic circles due to the expected cascading failures of European banks and the growing fear that the European Central Bank (ECB) won’t be able to prop them up.

Forbes.com makes a case for global financial doom built around the collapse of Spain, the resultant fall of the EU, contagion into the U.S. and China.

Within the next year, and likely sooner than later, Spain will break the back of Europe as it requires larger and larger bailouts. That crisis will impact the US economy, banks and stock markets. The slowing of both major zones will impact China’s already slowing export machine, and then the bursting of the real estate bubble will strongly impact spending of China’s new upper and middle class.

China’s “hard landing” will then accelerate already falling commodity prices and hurt the exports of many emerging countries. That’s how we get a worldwide financial crisis that is deeper than 2008 and further stimulus plans will quickly become impotent as is already the case in Europe. The dangers of a global crash are high between late 2012 and late 2014.

Even left-leaning Politico sees the possibility of a world-wide economic calamity, but they don’t make the case that it’s a cascading failure as much as a bunch of bad stuff happening in different places at the same time. Kind of a set of terrible coincidences:

 – an Asian slowdown brought on by European woes

– India’s economy sputtering to a nine-year low

– a continued economic slowdown in China

– weakness coming out of South Korea and Australia

– a growing banking crisis in Spain

– a deepening of Greece’s economic collapse

– increased economic problems across Africa

– the desperate plea of European bankers for a unified rescue fund

MSNBC’s Morning Joe comments on a Wall Street Journal article talking about an Asian slowdown, Spanish banks and the terrible unemployment report in the U.S.

The fact that the D-word is even being floated has implications. When dire news is floated, it is often intended to soften the blow of the actual bad news that is sure to result. The media is circulating “global depression” so that everyone is prepared for the absolute disaster and can be relieved when they discover that it’s only a global recession.

A global recession is all but guaranteed at this point. By the end of the summer the slowdown will be obviously impacting the U.S. economy at the worst possible time for Barack Obama’s re-election. Maybe Jay Carney will be able to convince us how Obama saved the U.S. from the global depression while the rest of us shake our heads knowing that the Obama recession never actually ended.