Searches for exits from current crisis breeding alphabetical financial neologisms
Economists’ ongoing searches for ways out of this current global financial meltdown are fuelling growth in alphabetically lettered-recovery theories as they increasingly use the letters of the English alphabet to describe the graphical illustrations resulting from their data on the status of their national and global economies and their growth prospects in the near future.
The new trend, tagged ‘alphabetical financial neologisms in modern economy,’ has deepened the existing volume and scope of English lexicon as new notions are being used to explain the new tendencies on the beleaguered capital markets. The most currently used letters are V, W, U and L, while J and other letters as well as other metaphorical illustrations such ‘zigzags,’ ‘lightning bolts,’ etc., are also gaining popularity among neologism-loving financial researchers. The choices of these letters or symbols stem from their unique shapes, and hence help to more vividly illustrate the graphical patterns resulting from analyses of key economic data.
Economic recovery theory neologisms expanding English lexicon
However, some experts are questioning the new meanings of words that differ from their traditional dictionary interpretations. Thus, citing the ‘L’ recovery theory, experts have noted the vertical part of ‘L’ that means that the economy is falling and the horizontal part that means an absence of growth or further decline. “This is what is funny about the ‘L recovery theory’ as it envisages the economy going ‘down and staying flat,’ which, technically speaking, does not mean recovery in its traditional meaning of improvement,” Jonathan Miller, president and CEO of Miller Samuel, Inc., a leading New York-based real estate appraisal and consulting firm, said. “So, I think economists have expanded the English language, as 'recovery' now does not only mean improvement, but also 'not getting worse.'”
“The choices of certain letters and symbols stem from their unique shapes, and hence help experts to more vividly illustrate the graphical patterns resulting from analyses of key economic data.”
But apart from these linguistic inconsistencies, the use of lettered theories is on the increase, as they help to more vividly illustrate the status of the economy and its expected growth dynamics as it exits the current crisis. For instance, the ‘V’ theory envisages that the global economy after its sharp decline will also enjoy an accelerated rebound to full normalcy. Similarly, the ‘U’ model is almost like the ‘V’ model, with the only difference being that the rate of recovery will not be as sharp, as illustrated by the curved lower part of letter ‘U’, but more prolonged. Naturally, these theories are based on the best-case scenarios, and are thus more popular among leaders of the most seriously battered economies, who are translating the so-called budding 'green shoots of economic recovery’ as meaning the end of the recession and the beginning of a rebound.
Unlike these two theories, the prospects of the global economic recovery depicted by the ‘W’, ‘L’ and ‘J’ theories are not that rosy. For instance, the ‘W’ model envisages a rollercoaster trend, where acute recession will be followed by sharp recovery, which then relapses into another cycle of woes before resuming accelerated growth. Supporters of the ‘W theory’ have argued that the massive fiscal stimulus packages injected into the global and national economies will stem the negative trends and advance other positive tendencies in the financial markets, but as soon as these stimulus packages are wound down, the global economy would relapse into another recession.
Reasons in favor of the worst case scenarios
One of the key reasons favoring the worst case scenarios stems from the fact the fundamental reasons that prompted the crisis in the first place have yet to be adequately addressed. For instance, some of the proposed reforms in global financial institutions and national financial markets regulations at several G8 and G20 meetings have yet to be implemented, while those executed have yet to generate the expected positive results. Thus, the global and national economies are still contracting; unemployment is still rising as large corporations continue to lay off workers, etc.
Besides, credits are still tight; consumers are still overleveraged, retail figures still largely pessimistic, while most prices on homes and consumer goods are still deep in the red, and unaffordable. All these negative factors do not envisage a V recovery, but on the contrary, could set up a stage for another recession, thus favoring a ‘W' recovery trajectory. In other words, the global economy will experience a number of occasional bright ‘spots and false starts,’ as the current crisis is not one of the traditional regular cyclical cataclysms, and consequently, one cannot expect standard textbook recovery patterns from such an unprecedented 
recession caused by years of irresponsible credit creation, poor regulations and the fundamental negatives that had resulted from them.
Besides, there is an assumption that the subprime mortgage, which ignited the current recession, was a result of borrowers taking more loans than they could afford to repay, thus putting the blame of the crisis on consumers’ recklessness and bankers’ greed. However, the supporters of this view often forget that consumers, especially in the West, became over-indebted out of acute necessity fueled by consumption habits, as they simply had to borrow in order to survive. For instance, the ratio of debt to disposable income is about 130% in the United States and 150% in the United Kingdom, according to these countries’ official data. This means that their citizens’ capacity to get basic necessities – send children to college, buy houses, maintain traditional living standards, etc. - was compromised, and hence, were forced to borrow to bankroll these essential everyday needs.
On the other hand, the 'L' model means a fall into sustained stagnation, as the global economy goes into ‘hibernation,’ where it can neither generate no further fall nor growth. Proponents of this theory frequently cite the recovery that the U.S. housing market after the stock market crash in 1987 that took five years to normalize and Japan’s economic debacle in the 1990s’ — now generally referred as the 'lost decade' — as illustrative examples. Other market analysts, who are favoring the V theory, often cite the histories of past recessions as the premises for their positive outlooks on the global economy. Citing the so-called Zarnowitz Rule, named after the famous business-cycle economist, Victor Zarnowitz, experts say that all historical observations have shown that steep downturns, like the current crisis, have always been followed by equally sharp rebounds.
According to these experts, victims of regional and localized crises were able to leap out of such crises because they were able to export their goods to the rest of the world that was unaffected by the crisis, citing the case in the United States in 1980s and Japan in the 1990s as examples. However, it is the scope of the current crisis, which has simultaneously affected all countries, that has made previous recovery theories irrelevant this time around. This is because all previous recessions had traditionally involved one or two countries at a time; consequently, such depressed nations were able to sell their exports to the rest of the world, which was not affected by the downturn. Therefore, since the whole world is in crisis, there are no such countries to help pull the others out of this downturn, and as some experts have aptly noted, ‘the current recession will linger longer until our distressed world finds another planet ready to buy its exports.’
“The new trend, tagged ‘alphabetical financial neologisms in modern economy,’ has significantly broadened the existing volume and scope of English lexicon as new notions are being increasingly used to explain prevailing tendencies on the beleaguered markets.”
On the other hand, those favoring the L-, U- J-shaped and other lettered-recovery and other metaphorical models have also cited the scope and unprecedentedness of the current crisis, with its pan-global implications as the grounds behind their pessimistic outlooks and the reasons why the traditional rule book on 'V'-model recoveries is not applicable to the current meltdown. For instance, Paul Krugman, the Nobel Prize winning economist, has noted that the recovery prospect for the global economy will not be V-, but L- or U-shaped. “This means that instead of springing straight back, the global economy will have a prolonged period of ‘flat growth’ or, at best, slowly improving performance.”
In practice, this means that it will take much more than governments’ fiscal stimulus packages or innovative monetary policies, such as the so-called ‘quantitative easing’ and other non-traditional strategies, for both national and global economies to successfully exit this financial mess. In other words, such non-traditional approaches will certainly create the grounds for the appearance and use of new lettered theories for the searches of effective exit strategies from this current crisis or other similar meltdowns in both global and national economies in the future.
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