The Return Of The Double Dip

The more distance that most of the large national economies put between themselves and the deepest part of the recession, the less frequently the term “double dip” is used. Government officials in the US have said, in almost every case, that a double dip recession is no longer a possibility.

The likely causes for another recession, which are enumnated by only the most pessimistic economists, are unemployment and lack of access to credit for both consumers and business.

The IMF added a slightly different wrinkle to the reasons that the economies of China, Japan, the EU, and US may fall back into a period of negative economic growth. Stimulus packages that are withdrawn from the markets too soon could cause national GDP to contract again. “Recovery in advanced economies has been sluggish,” Dominique Strauss-Kahn the head of the IMF said. “We have to be cautious because the recovery has been fragile.”

 Strauss-Kahn wants the central banks and treasuries of the largest nations to continue to pour hundreds of billions of dollars in to creating jobs and liquidity. He is stating that none of these economies this year is self-supporting.

The idea is clearly a good one because it errs on the side of caution, but caution, in this case is costly. There are already concerns that the borrowing of some nations, even the US and UK, will eventually lead to levels of taxation that will slow their economies again. As credit agencies eye that finances of these nations they have cautioned that huge national debts may be unsustainable and the credit service will burden national budgets for decades.

It is a cause of damned if you do and damned if you don’t. And, politicians running on platforms of keeping stimulus packages in place and raising taxes are not likely to survive the next round of elections no matter where they live.

Douglas A. McIntyre