Double Dip Fears

I guess we have been hearing this for the longest time but it seems that fears of a double dip recession is still there. Just recently, President Obama announced plans to pump in another $50b into the economy through infrastructure works, hoping to ease unemployment rates and boost recovery.

Interest rates have also fallen sharply and it seems that the double dip fears are indeed real.

On the other hand, the economy has been supported by increased corporate spending and strong profit growth and healthy cash flows indicate a certain legitimacy to the overall recovery. Nevertheless, it seems that US GDP forecasts will continue to slide in the near term.

At the same time, it is worrying that policymakers in the EU are already focusing on austerity measures to cut budget deficits. Historical evidence has often shown that increased state spending has a correlation in helping economies emerge from recession. Joseph Stiglitz has warned that such austerity measures could have systemic consequences for Europe and the rest of the world.