Fears of a new Great Depression, all too real after Lehman Brothers collapsed a year ago, have begun to recede as the global economy emerges from the depths of recession with the help of massive government intervention.
Nothing so dire has materialised and forecasters believe the economy is already growing once again after a recession that may well enter the record books as the worst since the depression of 1929-33, but a very distant second.
Cross-border trade between countries is showing renewed signs of life, regular business surveys have been suggesting stabilization since March, triggering a sharp rise in stock markets, and now forecasters such as the OECD are saying the downturn is coming to an end.
Marc Touati, economics research chief at Global Equities, a French financial services brokerage, claims fears of a 1929 rerun will soon join SARS and the Y2K computer bug in the annals of economic calamities that never materialised.
There is a big catch though. The economy is recovering thanks to trillions of euros of central bank and government intervention and remains dependent on that public life support.
The next challenge will be when and how fast to remove the fiscal and monetary stimulus that broke its fall, and doing so without causing a relapse or stoking excessive inflation.
'Right now the recession doesn't feel so bad,' said Deutsche Bank's chief European economist, Thomas Mayer. 'But the day of reckoning is still ahead.'
Finance ministers from the world's largest economies agreed on 4 September that now was no time to withdraw stimulus amounting to the equivalent of 2% of global GDP this year and 1.6% in 2010, according to IMF estimates.
Last September, the world was already struggling with a credit freeze stemming from a collapse in the US housing market. The demise of Lehman, viewed as one of those banks that was too big to be allowed to fail, triggered a far deeper global economic crisis and left markets temporarily paralyzed.
Federal Reserve Chairman Ben Bernanke said later that the markets went into 'anaphylactic shock'.
Growth
A year on, while experts disagree about relapse risks that lie ahead, the worst of the downturn seems to have passed as far as global trade and industrial activity are concerned.
The MSCI global share price index has been rising since the lows of March and has recovered about two thirds of the ground it lost since the Lehman bankruptcy filing on 15 September 2008.
US Yale university economist Robert Schiller said in an end-August article in the New York Times that the renewal of confidence was now becoming infectious.
Truly global statistics are hard to come by but according to the Dutch Bureau for Economic Policy Analysis, which aggregates official data for some 70 countries, worldwide industrial output rose 2% from May levels, more than in any month on records going back to 1991.
World trade volume rose 2.5% in June, the strongest rise since July 2008, says the state-funded Dutch agency.
'It's still likely to be a relatively slow recovery but even if it is it's a vastly superior performance than back in the 1930s,' Jorgen Elmeskov, chief economist at the Organisation for Economic Co-operation and Development, said.
The OECD effectively called an end to the recession in the industrialised world on 3 September, saying economic growth looked set to return in the current third quarter after second-quarter accelerations in China and broader Asia that resuscitated cross-border trade.
The public think-tank now sees renewed expansions of gross domestic product in the United States and the euro zone in Q3, after respectively four and five quarters of shrinkage.
