US- Another recession?

As the major component of the GDP- private consumption is slowing down along with falling consumer confidence and higher unemployment, it is imperative to the US government to look for stimulus. The Congress decision to raise payroll tax and cutting back unemployment benefit may have negative impact in such a scenario. The S&P pressure on the US is likely to put pressure on recovery.  If you listen to these agencies too much, another recession will hit the US and that will be more severe than 2008 one.

As the Nomura economist Mr Koo talked about the “Balance sheet” recession in the US mostly the same kind in like Japan during the South Asian crisis, fiscal spending is the key to pump up activity.

The rating cut by the agency may not have a bad impact on US treasuries. US yields have been dropping and bond prices are moving higher amidst fear of the unknown after Friday’s rating cut. US dollar may not slide much as it is still better than those of Euro or Pound.