Fears of a new Great Depression, all too real after Lehman Brothers collapsed a year ago, have abated as the global economy emerges from the depths of recession with the help of massive government intervention.
Nothing so dire has materialized 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 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, says fears of a 1929 rerun, like swine flu, will soon join SARS and the Y2K computer bug in the annals of economic calamities that never materialized.
There is a big catch though. The economy is recovering thanks to trillions of dollars 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 Sept. 5 that now was no time to withdraw stimulus amounting to the equivalent of 2 per cent of global GDP this year and 1.6 per cent in 2010, according to IMF estimates.
Last September, the world was already struggling with a credit freeze stemming from a collapse in the U.S. 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".
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 Sept. 15, 2008.
U.S. 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 2.0 per cent from May levels, more than in any month on records going back to 1991.
World trade volume rose 2.5 per cent 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 Organization for Economic Co-operation and Development, said.
The OECD effectively called an end to the recession in the industrialized world on Sept. 3, 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 the third quarter, after respectively four and five quarters of shrinkage.
Researchers at the U.S. Federal Reserve Bank of Saint Louis reckon the average GDP loss caused by recessions is around 2 per cent for the U.S. economy.
Assuming recovery does come in the third quarter, the real GDP loss will be almost twice as big and will top other major downturns, notably during the oil crises of the 1970s.
This time, U.S. GDP loss totals 3.9 per cent across the four quarters of recorded shrinkage between second-quarter 2008, the cycle peak, and the end of the second quarter of this year, according to Reuters calculations based on the latest government data.
For the euro area, the cumulative GDP loss amounts to around 5.0 per cent over the five-quarter contraction period so far, to the end of the second-quarter of this year, calculations based on official data from EU statistics office Eurostat show.
Big as both the U.S. and European losses are, they pale beside losses more of the order of 25 per cent in the Great Depression, and top U.S. GDP losses in the 1970s too.
Even if recovery is at hand, regulators around the world are warning that unless lessons are learned about the credit bubble which led to bust - fuelled by banks' excesses - history may be doomed to repeat itself.
"This recession is more like the U.S. recession in the early 1990s when the Fed (U.S. central bank) had to cut interest rates and that led to very low interest rates in Asia for a long time leading to the 1997 asset bubble burst," said Frederic Neumann, Asia economist at HSBC in Hong Kong.
"This time, the Fed will also need to keep interest rates low for a long time ... which means interest rates in Asia will be low and that could lead to another asset bubble."
Deutsche Bank's Mr. Mayer says that central banks are in a bind because the broader economy now looks to be recovering faster than the financial sector. That generates a conflict between the need for interest rate rises as GDP gains pace and continued dependence of some large banks on low policy rates for survival.
"When the real economy is coming back faster than the financial sector soon we will be talking exit, but central banks will have a hell of a time exiting as fast as the real economy is exiting the mess -- and that's the real problem," Mr. Mayer said.