Tuesday, September 15, 2009

Stepek: A Double-Dip Recession Is Coming

John Stepek gets it. He lists three reason a double-dip is headed this way:

As Ambrose Evans-Pritchard notes in The Telegraph this morning, US bank lending fell at an annual rate of around 14% in the three months to August. Professor Tim Congdon of International Monetary Research tells him: "There has been nothing like this in the USA since the 1930s." And we all know what happened then...

The massive budget deficit in the US leaves it vulnerable to foreign buyers of its debt deciding not to prop it up anymore (the same goes for the UK). So any spending or money-printing plans have to be tempered by the understanding that any hint that the government is trying to inflate its way out of debt could drive up borrowing costs rapidly...

Thirdly, there's protectionism, another nasty reminder from the 1930s. Fears over this problem had drifted away somewhat, but the US government's decision to impose tariffs on Chinese tyre imports has brought them back to the surface.

No comments:

Post a Comment