World’s Economy Already Past Worst Stage claims Nobel Laureate

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Nobel economics laureate Robert Mundell has declared that the worst of the world economic crisis is over, saying the US is now in the recovery phase, according to a report by the Korean news agency Yonhap.

“The world economy is not in as bad shape as it appears from the news,” he said in his keynote presentation at World Leaders Forum held to commemorate the 60th anniversary of the founding of South Korea.

“The real economy has not collapsed. The worst is behind us.” Citing US and European economic growth trends as a reason for his optimistic view, he said: “The U.S. growth was superb in the first three quarters of 2007. Then there were two quarters of nearly zero growth – a severe growth recession,” the professor of economics at Columbia University in New York said.

“Then the second quarter of 2008, the US growth shot up to 3.3%. In the third quarter, growth will probably turn out to be about 2%.” Mundell pointed out that the pattern of the slowdowns in the US and European economies was similar to that in 2002.

“At that time, the US went first, then Europe followed it about eight months later,” he said. “The same pattern is with us now. The US is now in the recovery phase while Europe is retreating, giving rise to the huge swing of exchange rates.”

The professor, nicknamed the “father of the euro,” said there is a need to consider the possibilities of an Asian currency or an Asian Monetary Fund.
Mundell, who won the Nobel Prize in economics in 1999, developed a pioneering theory of optimum currency even before the idea of the single European currency was hatched in the 1970s.

“My view is that it is best for Asia to pursue both a regional approach or an international approach in response to the Europe-led increased regionalisation of the international monetary system,” he said.