Recession inevitable, says Goldman Sachs

With all the indications of a meltdown at Wall street and the unemployment rate growing by the day, it seems that the chances of a recession hitting the United states has grown from 25% to that of 50%. With record numbers of defaulters on Mortgage payments, the banks are tightening the strings on all loans and other forms of credit. With the Dollar taking the plunge to new lows against a whole range of currencies, it is no wonder that most of the economists worldwide are predicting that the Recession has indeed began in the United states.Goldman Sachs believes the recession to be inevitable.

The question that everyone is asking themselves is as whether the U.S economy is strong enough to withstand the cold weather than seems to be ahead. The one thing that the president and his board of advisers are hoping to do is to reduce the taxes with the hope that this will rejuvenate the economy. By itself, it may not, but coupled with the Fed cut that is expected to happen by the end of this month, it may well give that much needed boost to the economy at large.

The Fed is hoping that a cut, even as much as 50 basis points may be what the doctor has ordered. But the Fed should also take care to remember that reducing the interest rates by a large margin could have a very negative impact on the whole. The days ahead will surely tell us if the recession has set in or not. It is no longer a question of 'will it happen' but rather a question of 'when will it happen'.

Dark news ahead for the U.S economy?

With the Fed mulling over interest rate cuts, the news that the Fed is planning a series of cuts has already sent the Dollar to new lows against some of the major currencies. Now the Fed realise that the spiralling borrowing costs, the falling housing rates along with the credit crisis, things are going to look pretty dark ahead.
Already many of the companies are feeling the heat although at the moment it is being felt only by the outsourcing companies, as they have to pay more to get the same service which they had gotten before for a lesser cost. As cost increases, the borrowing cost will also increase. With housing rates falling and the credit squeeze increasing, soon no one would want to purchase anything at all and recession would have set.
And all indications are that this may well happen in the United states and the Fed is realising this and is trying to find its way out of the dark. But even if the Fed cuts rates all across the board, all of that may be a case of 'Too little, too late'!

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