NEEL KASHKARI: The Real Danger In The Fiscal Cliff Isn't Recession

Neel Kashkari

Photo: Mark Wilson/Getty Images

PIMCO’s Neel Kashkari just spoke at the Bloomberg 50 Summit with Wilbur Ross and Columbia University’s Andy Stern.The topic of discussion — America’s looming fiscal cliff. The fear is that the end of the Bush tax cuts, mandated spending cuts and hitting the debt ceiling will cause an explosion that could reverse our economy’s slow march out of recession.

Kashkari, though, doesn’t think that’s going to happen. The real danger, he said, is not that the country could tip back into recession, but the damage Washington politicians could do as they jump over the cliff.

“We’re going to avoid recession,” said Kashkari, “but there will be a drag. How much, we’re having trouble quantifying that…”

Kashkari argued that the difficulty is in knowing how brutal Washington infighting will be. Think back to last summer and debt ceiling argument. Sure, we survived, but not without a hit to our markets and our credit rating.

“It comes down to leadership,” Kashkari added. 

All that said: Kashkari fully expects QE3 and he sees 1%-2% GDP growth in the coming year.

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