Over the weekend, Tyler Cowen gave us Eight reasons why we are in a depression:

1. We have zombie banks.

2. There is considerable regulatory uncertainty in banking and finance.

3. There is a negative wealth effect from lower home and asset prices.

4. There is a big sectoral shift out of real estate, luxury goods, and debt-financed consumption.

5. Some of the automakers are finally meeting their end, or would meet their end without government aid.

6. Fear and uncertainty are high, in part because they should be high and in part because Bush and Paulson spooked everyone.

7. International factors are strongly negative.

8. There is a decline in aggregate demand, resulting from some mix of 1-7.

To which Arnold Kling adds:

I think that when the economy does come back, it will come back strongly. There will be pent-up demand, because of the consumer spending that is being foregone during the downturn. But whether this resurgence occurs in 2009 or closer to 2019 is difficult to forecast.

The most vague of Cowen’s points (in this post, at least) is the international factors (# 7).  It’s alarming, but how is it alarming, and to what degree?  And the biggest unanswered question for Kling is when American-driven aggregate demand revives.  Kling is probably right to assume the death of the American consumer is not imminently upon us; consumerism just may be gravely wounded.  It’s our nature to shop.

Brad Setser helps fills the gap between these two points.  He writes:

Words don’t really do justice to the brutality of recent downturn in Korean and Taiwanese exports.

These look a lot like charts of financial variables after a bubble bursts, not charts of the level of exports. That isn’t good.

Korea and Taiwan aren’t the global economy. But they both report their trade data quickly – and they both export a ton. I wish I could say that I thought they were sending a deceptive signal…

But they aren’t.  He’s, right: Korean and Taiwanese manufacturing do represent a very small sample of the global economy, but doesn’t this put the “decoupling” theory out to pasture?  It’s clear that Asian exporters are taking cues from the U.S. economic outlook, which, lest I remind, is abysmal, and will continue to be for quite some time.

The international picture will continue to unravel as the crisis turns to a recession, and the recession, God forbid, turns to depression.  Setser points out that what is happening in Taiwan and Korea is not a blip; both have already successfully weathered the tech/electronic bust of 2000; adjusted export strategies in 2006 from America (slowed) to Europe (increased), and survived currency valuation against China’s RMB.  In other words, it’s serious this time.

If the American consumer delays a triumphant return from the end of 2009 to, as Kling posits, 2019, the picture Setser paints of Taiwan and Korea may only be a primer for more troubling global economic times.

Happy Monday!