Prometheus 6

A New Economic Order
Why the Downturn Had to Happen
By Neil Irwin
Washington Post Staff Writer
Friday, March 14, 2008; D01

Retail sales plummeting. The dollar at a new low against other world currencies. A 60 percent jump in U.S. home foreclosures. A major investment fund going kaput.

This is what a reordering of the world economy looks like in real time.

Don't think of yesterday's economic news as discrete events. They are small pieces of a much bigger reversal in a series of imbalances that made Americans feel richer than they were and created unsustainable distortions in the world economy that are now righting themselves.

Americans are consuming less, and their houses and other assets are becoming less valuable. Painful as they may be, in the long run, both trends must happen to restore sustainable growth. But in the short run, they are wrenching changes that are probably causing a recession.