SCOTT SIMON, host:
We've all heard the old adage: Whenever the U.S. economy so much as sneezes, the rest of the world catches a cold. These latest round of problems may be much, much more.
Krishna Guha is chief U.S. economics correspondent for the Financial Times. He joins us from his office in Washington, D.C.
Krishna, thanks very much for being with us.
Mr. KRISHNA GUHA (Chief U.S. Economics Correspondent, Financial Times): My great pleasure.
SIMON: And we're reviewing some of the ways in which obviously the U.S. economy has been having its problems. How would you characterize the rest of world right now?
Mr. GUHA: Well, the rest of the world looks better than the U.S., but certainly not immune to the problems coming out of the U.S. and the financial markets. Growth in Asia, in particular in the emerging Asia - China, India, and some of the other fast-growing economies there - is very rapid, looks quite robust. In Europe, Europe is doing okay. Britain seems to be in more trouble than continental Europe. But everyone is really trying to figure out just how much of an impact the problems from the U.S. will have in the other parts of the world.
SIMON: 2008 was supposed to be the year of what's called decoupling. Wasn't in which the rest of the world would…
Mr. GUHA: That's right.
SIMON: Yeah. Well, has - do recent events suggest that that hasn't happened quite yet or what?
Mr. GUHA: I think it's a question of degree. The world today is somewhat less reliant on the U.S. than it was in times past. You have new growth polls, the emerging markets I talk to you about. Continental Europe looks in better shape than it's been for a number of years.
But at the end of the day, the U.S. is the biggest economy in the world. The U.S. financial markets are at the heart of the global financial markets. The U.S. banks and other financial institutions are at the heart of the world financial system. So people who argue that the U.S. can go into recession and that has no effect on the rest of world are being far too optimistic.
SIMON: We often get the impression that the rest of the world will follow the movement in the U.S. market. But this week, Monday was a holiday here in the United States so, of course, the rest of the world went first. Should we read anything into that?
Mr. GUHA: I think what it tells you is just how globally integrated the financial markets are these days. It's less a question of saying that people in Europe are following what happens in Asia or people in Asia are following what happens in the U.S. This is one global financial market. There are trades around the clock in different time zones, and a lot of the big financial institutions and players are making investments in multiple different markets, shuffling money from different assets and different places. So we're all in it together.
SIMON: Of course, the chairman of the Fed, Ben Bernanke, stepped in with the cut in the interest rates which certainly seem to steady the markets in this country for the time being. What about reaction in the rest of the world?
Mr. GUHA: Well, the other global markets also responded very positively. After all, they're hoping that the U.S. won't have a deep recession because if it did, it would cut down their exports to America and possibly make financial conditions in general difficult for everybody.
SIMON: If the U.S. should fall into a recession, is the world economy set up in such a way now? Does the rest of the world have to follow or is this something that can caught our eyes?
Mr. GUHA: The rest of the world doesn't have to follow the U.S. into recession. That is providing the U.S. doesn't go into a really deep and brutal recession.
SIMON: Mm-hmm.
Mr. GUHA: But the rest of the world won't get off scot-free either. You would expect to see some slow down in growth in other parts of the world and you'll also, I think, start to see much more differentiation between the performance of other foreign economies. There are some countries like China and India, where the fundamental economic growth story is so strong it will probably - mostly run through with only a small moderation in growth.
There are other countries - the Thailands, Indonesias, Malaysias, Philippines -of this world who've been doing okay but are potentially squeezed on the one hand by China and India, and on the other hand, of course, by the more advance economies. They're in this sort of no man's land. They might be vulnerable if global times get tough.
SIMON: Krishna Guha, chief U.S. economics correspondent of the Financial Times, thank you so much.
Mr. GUHA: Okay. A pleasure.