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Global Stock Sell-Off Stirs New Fears of Recession

One year after the Down Jones industrial average peaked above 14,000 points, it closed Friday below 8,500 amid a global financial slump. Economic analysts and reporters give insight on the latest Wall Street woes.

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    It was just a year ago this week that the Dow Jones industrial average cracked the 14,000 mark. But after the worst week in Wall Street's history, the markets are down more than 40 percent from those highs.

    The crisis has spread worldwide and raised the specter of a major and prolonged global economic slump, all of this despite repeated government actions.

    Where are we now? For that, we turn to: Paul Krugman, professor of economics and international affairs at Princeton's Woodrow Wilson School and a columnist for the New York Times; Amity Shlaes, syndicated columnist for Bloomberg and author of "The Forgotten Man: A New History of the Great Depression"; and Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations and a columnist for the Washington Post.

    Well, Paul Krugman, you wrote in your column today that policymakers have, quote, "reached the moment of truth." What does that mean? And where do you see the situation?

    PAUL KRUGMAN, columnist, New York Times: Well, the combination of the depth of the crisis and the fact that all the finance ministers are in Washington this weekend means that they really had better come up with something, at least a very strong statement of principles, you know, if not the details of a plan for a global rescue.

    If they don't, then there's going to be even worse panic on Monday. This is the moment. It's clear to everybody now that we need a coordinated rescue. We need capital pushed into the system. We need some sort of guarantees to keep money flowing. If they don't do it this weekend, it's a very, very bad scene.


    You were with us, I think, last week just ahead of the bailout package being signed. And I remember at the time you said, "Not a great package, but we have to do it." A week later, nothing — seems to have stopped the drop.


    Well, yes, I mean, in some ways what has happened was what I was afraid would happen if the thing wasn't passed. In a way, that's an opportunity.

    Now, you know, the package as originally proposed is ancient history, so now Paulson and Congress can go back and do it right. But the urgency is much, much greater.

    Really, it's been almost four weeks since all hell broke loose, when Lehman was allowed to fail, and those four weeks have been largely wasted. And we really can't afford much more delay. This is 1931 taking place 77 years later all over again.

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