The Financial Times‘ Martin Wolf is not a natural bear. He is a sober, precise economic observer. So people who remain optimistic in the current “downturn” (president Bush’s phrase), may find Martin’s analysis today very sobering.

A few weeks ago, he wrote a generally upbeat analysis. But today he looks at the potential downside, and he believes there is a chance of a global recession. “This then is the nightmare:a huge simultaneous shift in the balance between desired savings and investment of the US and Japan. Since these two economies generate almost 45% of global GDP at market prices, the impact would be a large net reduction in demand for the rest of the world.”

Martin’s concluding advice? “The right policy for individuals is to be aware of the risks. But policymakers must respond. It may prove impossible to avoid the abyss. It should still be possible to stop before the bottom.”

***More on the dismal science
While Martin Wolf may be among the most thoughtful economic writers, Princeton’s Paul Krugman is one of the most enjoyable (and simultaneously thoughtful). Michael Wolff has a trivial but enjoyable interview with the generally gloom Krugman.