Economist Intelligence Unit: "30% Chance of Global Depression"

On March 20, 2009, the Economist Intelligence Unit—a fantastic source of information on the business climate in every country in the world—predicted a 30% chance for the world economy growing at less than 1% for the next fiver years, which would qualify as a depression.

Depression would be characterised by mass bankruptcies and job losses. In a vicious cycle of debt deflation, the burden of debt would rise in real terms as collateral declined in value and incomes fell. As bad debts piled up, banks' balance-sheets would be weakened, resulting in forced asset sales. These would drive down prices further. Like banks and financial institutions, households and companies would “deleverage”, disposing of assets at fire-sale prices to pay down debt.

Under this scenario, the major developed economies would grow by less than 1% on average over the next five years. Even when growth resumes, it would do so at levels too low to create jobs for a new generation of unemployed.

Alternative scenarios are not good either.

...there is a 60% chance that the stimulus operations now underway will restore stability by 2010/11, albeit at lower growth levels than we’ve been accustomed to.

[...]

A third scenario, in which failing confidence in the US economy leads to mass withdrawal from dollar-denominated assets and a collapse in the US currency, carries a 10% probability.

Though I've heard "May you live in interesting times" is not actually a Chinese curse, it would be a serious curse if it were.

Link to the press release.