The latest view from Nouriel Roubini is that there’s a whopping 40% chance of the U.S. economy double-dipping into recession due to the fact that the government is now helpless to defend against any unexpected economic shock which may occur.
“We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009,” he said, describing a self-feeding process as the real economy and the credit system hurt each other.
“There is a 40pc chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it,” he added.
Hans-Werner Sinn, head of Germany’s IFO Institute, said the US would have to purge its debt excesses the hard way.
“The bitter truth is that there is no way out of this with monetary and fiscal policy. They will just have to see their living standards go down. I see a decade of difficulties for the US,” he said.