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Are developed economies left with any option?
Mon, 26 Sep Pre-Open

These days recession rather than double dip recession has become the talk on the streets. Uncertainties in the global economy are looming large after the recent debt crisis in the US and some European countries. The concerned governments and central banks are taking measures to avoid the imminent crisis in their economies. But the effectiveness of those actions has been increasingly called into question. These stimulus packages were introduced to stimulate growth and employment. But rather than deliver on that front, all that it has done is make the developed nations highly indebted. So acute has this crisis become that it appears that these economies are left with no alternatives to get away.

According to New York University economist Mr Nouriel Roubini, known for predicting the recent recession well before it happened, there is not much that the US and Europe can do to stimulate their economies. Therefore, their economies would contract and finally would fall into recession. As a matter of fact, Mr Roubini believes that these economies are already into recession. Please note that the US Federal Reserve has already rolled out many stimulus measures to get the growth momentum on track and to curb rising unemployment rates in the US. However, unemployment in the US continues to remain persistently high. The problem for the US is compounded by the fact that there has been an increasing political deadlock at the centre and so even noted financier George Soros believes that this coupled with the government's tax policies has veered the economy towards recession.

And it is not just in the medium term, but there is the possibility of economies remaining paralysed by sluggish growth and high unemployment for years. Big organisations such as World Bank and IMF have been uttering words of concern in this regard.

There is no doubt that economies around the world are in trouble now. But the real question to be asked is how severe would this recession be? Will it manifest in the form of a debacle for some big institutions like we witnessed during the 2008 meltdown? Or even worse, would there be a default by sovereign countries? Only time will tell.

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