What if they gave away a recession and nobody came – this just might be the story of the presumed Greatest Depression since 1930.

In for a penny, in for a pound. And several Big Time pounds may be in for being not just wrong, but massively wrong. Over the last several months, there has been a constant drumbeat announcing the impending doom. It all started out quite innocently. There was widespread recognition of two factors affecting the US economy. First, that with the US current account deficit at historical Thai lows (close to 8 percent of GDP, a level witnessed by Thailand just before the Thai and East Asian crash of 1997-1998) the US dollar had to depreciate. Second, and related to this US spending spree was the observation that the US savings rate had to rise from its historical lows.

But now disagreement started among the economics faithful. Some argued that the US dollar needed to depreciate against the Asian currencies, particularly China, in order for a dent to be made in its current account; others argued that it was Europe and Japan which was "responsible" for the ever expanding US deficit. But all agreed that the US housing market, along with housing markets around the world, had to cool off.

Then along came the sub-prime crisis or modern financial innovations. Estimates of banking losses of around $ 400 billion are now widely accepted. As these losses rose to the surface all hell broke loose in the financial center. It is this event that started the forecasts of the great US depression. Everybody chimed in and wanted to be the first to claim credit for the forecast, heck reality, of the US depression. Everybody could see that the housing sector had collapsed, and was collapsing further, so a real no-brainer was forecast. The institutions and individuals who chimed in with their few billions worth would convince anybody. George Soros, Mark Mobius, Jim Faber, the IMF, Goldman Sachs, JP Morgan, Morgan Stanley, Alan Greenspan, all said that a recession was a near reality and a Depression a distinct possibility. If not a Depression, then a prolonged recession; if not a deep recession, then sub-par low levels (around 1 %) of GDP growth as far as the forecast could be made. These names are legendary and I apologize for missing other BIG names, but the fact is that the names of super distinguished market players forecasting a depression would fill this entire page, let alone my column. Merrill Lynch went so far as to write, just a few weeks ago, that damn the data we are already in a recession. A consistent and near lonely exception to this doom today, doomer tomorrow assessments and forecasts was the firm Macroeconomic Advisers, led by Dr. Laurence Meyer, formerly of the US FED. This firm has consistently maintained that not only will the US avoid a recession, but that the recovery will also be sharp. There are a few other lonely outfits (Oxus!) but really the cupboard is near empty.

Associated with calls for a prolonged historical recession-slow growth spell was the conclusion that those who had argued about globalization and global decoupling were wild-eyed optimists or just plain stupid. The world really had not changed, and if US went into a deep slump, everybody was threatened Big Time. But what happened, or has happened to date? The US has grown for two successive quarters at the snail pace (formerly Japanese and European pace) of 0.6 percent per annum. Japanese industrial production growth has accelerated ; this according to the new 2004 base. China's growth rate declined marginally from above 11 to "only" 10.5. Korean growth continued, as growth in several parts of Latin America and Africa. Indian growth rate, hurt more by a highly contractionary exchange rate and interest rate policy than by the US, has not been affected in the last two quarters, though it's 8.3 percent growth rate is well below last year's 9 % plus growth, and considerably below its realizable potential of 10 % growth.

If more than a marginal slowdown has not occurred in non-US world growth, then the important question is "Why Not?" And that question will be reinforced if the US avoids a recession as seems likely. There are two independent explanations for the possible future reality of a Depression forecast gone horribly wrong. The first explanation has to do with a non-appreciation for how much the world has changed. I always thought that Indians, especially liberal left Indians, were prone to this disease; now it appears that even middle of the road Western analysts/experts/commentators/ex policy makers etc. have caught the Indian viral export. Today, India and China alone account for as much world US dollar growth as the US economy itself. This simple statistic explains the "stabilization" possibilities in world growth today, and why the world economy is likely to prevent the US economy from entering into a recession. Just look at US export growth. The Great Depression Redux - forget it.

So how many people can get it all wrong; there are the investment houses; they are the deans - soros faber - goldman sachs - and there are the central banks, especially in Europe [would have added india but lately our central bank has creditably ignored Then there are the congenital bears of the Indian stock market and economy - if both are included, this would mean the leading investment houses; then there are various traders, TV anchors, etc. The chorus they have all been singing has gone broadly like this: What they failed to recognize is that none of the traditional leading indicators of recession were working according to history - retail sales, employment, unemployment, industrial production, purchasing managers - all concentrated on one variable , housing price decline - and related, sub-prime

Question arises - why so resilient - because of the newly emerged middle class which is on a virtuous cycle of productivity curve income curve savings curve you name it virtuous curve; so while financial markets will go thru the cycle, not the real economy - and when you have the deans at the IMF forecasting that the world ec will have its worst year in ?? years, and pronouncing it with great "research" inspired confidence, you know

The second reason would be the large share of emerging markets in world growth - just india, China and the US

So we have interesting next6 months - on one side, almost the entire fraternity - list - on the other side, a handful of organizations/economists come to mind - particular mention of meyer assoc, micheal dooley of Role of Bernanke - if successful (and my bet is yes) the best since Volcker which is the same as the second best in history - The jury is by no means out , the story by no means ; but the following snapshots are indicative - commodity slump - then compare to synchronized across the world slump - 98/99 east asia and Russia, but not US or Europe - Merril lynch - already in it as well as several others -

There was widespread recognition of two factors affecting the US economy. First, that with the US current account deficit at historical Thai lows (close to 8 percent of GDP, a level witnessed by Thailand just before the Thai and East Asian crash of 1997-1998) the US dollar had to depreciate. Second, and related to this US spending spree was the observation that the US savings rate had to rise from its historical lows.

But now disagreement started among the economics faithful. Some argued that the US dollar needed to depreciate against the Asian currencies, particularly China, in order for a dent to be made in its current account; others argued that it was Europe and Japan which was "responsible" for the ever expanding US deficit. But all agreed that the US housing market, along with housing markets around the world, had to cool off.