Perhaps the most depressing news we’ve heard all day is that economists at Wall Street firms are predicting that we may be headed for another recession in 2010.
Wait a minute! Aren’t we already in a depression? Aren’t we supposed to come out of it next year?
Even though there’s a consensus that the US will emerge from the current downturn sometime in 2010, economists are now fearing that banks, consumers and communities may become so addicted to low interest rates, financial bailouts, subsidies and other forms of government help that another recession could be triggered when these are curtailed. could another recession soon after the current one ends.
Sometime next year, much of the stimulus package will be spent. The Tarp funds will cease flowing before that. Inflation fears will likely cause the Fed to raise interest rates. Obama’s delayed blast tax hikes will loom. And now the fear is that the economy won’t be strong enough withstand the end of the rescue.
“The stuttering attempts to repair the banking and lending mechanisms so far by the new administration suggests that by late 2010, the specter of a second dip into recession will be looming large,” Merrill Lynch economist Sheryl King tells Reuters.
Let’s turn that frown upside down. At least if we have a “double dip” it means we’ll briefly emerge from the recession. So that’s a little ray of sunshine, right?