Not over yet: Global economy faced with a new recession following Japan's destruction

Japan’s struggle to avert a nuclear disaster and prepare for a reconstruction of epic proportions is one more risk for a global economy already grappling with mounting risks.

The threats to the fragile recovery were already rising before the devastating earthquake and tsunami brought the world’s third-largest industrial economy to its knees.

And they span the globe – from conflict and oil disruptions in the Middle East and rising inflation in China and other high-growth emerging economies to continuing debt woes in Europe and persistent weakness in U.S. housing and employment, whose recovery is essential to any sustained U.S. rebound.

Adding to the wall of worry, governments have pulled the plug on massive stimulus programs, which played a crucial role in turning around economic fortunes in the wake of the 2008 financial meltdown and ensuing recession.

In their place have come a wave of austerity measures and tighter monetary policies, forced by financial circumstance, political pressure or, in the case of China and India, fears of runaway inflation.

Put it all together and “there is no logical reason” why the global economy will not slow markedly this year, warns Robert Kessler, head of Kessler Investment Advisors in Denver, who advises large corporations and institutions around the world on U.S. Treasury bond investments.

The green shoots of recovery that sparked optimistic forecasts last summer have been buried by a dark winter of growing geopolitical and economic discontent.

“Some time in the next few months, we will be seeing brown shoots again,” Mr. Kessler says. “You have a world that is going through a tremendous amount of turmoil.” (read more)