In the sequence of events that is spilling around the world following S&P downgrade is not about economy but about the “understanding of economy”. No surprise that Dow Jones and Nasdaq plunged deeper with renewed intensity when Obama appeared to assuage the investors during market hours. Clearly, people are skeptical of both economists and politicians as they apprehend that these experts are not capable to understand the problem underlying economy in the first place. The experts talking in terms of debt, interest, jobs, inflation, deflation, risk, leadership ultimately kept shouting as economic indicators plunged, “What the hell is happening?”  

In this context, S&P probably understands the inevitability of physical dimension of growth beyond conventional economic parameters. The rise and rise of China and many new populous countries around the world has put world economy in totally new environment. It appears that the world economy in this age cannot allow tiny nations (from the prospective of population) like Japan, Germany, Italy, Spain, Australia and Britain to play disproportionate roles for long. Even USA has to be downsized relatively as the competition between population and resource is getting somewhat rationalized.

The tendency of the market to repeat recession indicates that the current world economic model is self contracting as it tries to grow. Today, growth has physical limitation of resource. China alone consumes significantly a very high share of major world commodities. It is alarming because Chinese growth story is far from over, having tremendous residual scope of growth in coming years. Now, think of others like India, Brazil and Indonesia. Clearly, the concept of self contracting economy against growth is quite obvious!

No wonder that cycle of growth and recession may actually turn out to be a regular feature of World economy as adjustment for resource keep changing hands among countries. A “recurrent” recession rather than "double dip" is what is expected unless scientific inventions come thick and fast to remove the physical constraints facing world economy.