Tags: Moody’s | Zandi | Recession | Depression

Moody’s Zandi: Next Recession to Feel More Like Depression

By    |   Thursday, 11 Aug 2011 07:30 AM

Economists may debate whether the United States is headed for another recession, but there is a general consensus about one thing: if it happens, Recession 2.0 would be worse than the last and very difficult to escape.

If the economy double dips, Mark Zandi, chief economist at Moody's Analytics, told CNN Money that "it won't feel like a new recession. It would likely feel like a depression."

The problem, according to The New York Times, is that “most major measures of economic health — including jobs, incomes, output and industrial production — are worse today than they were in 2007. And growth has been so weak that almost no ground has been recouped.”

“When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone,” the Times reported.


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Recent stock market declines are one of the factors boosting concerns of a double dip. Major drops in the stock market result in wealth losses and it pummels consumer confidence.

"If we all pull back on spending, that's a prescription for a long, painful recession," Zandi told CNN Money.

“Unlike during the first downturn, there would be few policy remedies available if the economy were to revert back into recession,” the Times reported. “Interest rates cannot be pushed down further — they are already at zero. And the Fed has already flooded the financial markets with money by buying billions in mortgage securities and Treasury bonds.”

“There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession,” Nigel Gault, chief United States economist at IHS Global Insight told the Times.

Compounding the potential drama is the current political situation. The debt ceiling debacle provides a chilling outlook for attempts to tackle a problem of that magnitude in Washington.

"The reason we didn't go into a depression three years ago is the policy response by Congress and the Fed," said Dan Seiver, a finance professor at San Diego State University told CNN Money. "We won't see that this time."

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Economists may debate whether the United States is headed for another recession, but there is a general consensus about one thing: if it happens, Recession 2.0 would be worse than the last and very difficult to escape.If the economy double dips, Mark Zandi, chief economist...
Moody’s,Zandi,Recession,Depression
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2011-30-11
Thursday, 11 Aug 2011 07:30 AM
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