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Will it make a recession worse?
Retrenchment can make a recession longer and deeper.
A few more months like August would make a recession likely.
But a new paper* by Wynne Godley and Alex Izurieta at the Jerome Levy Economics Institute argues to the contrary that large, unsustainable imbalances may make a recession inevitable.Mr Godley was among the first to argue that America's boom of the late 1990s was unsustainable, for two reasons.
Does one down quarter make a recession?
"That would make a recession worse," said Dan Seiver, a professor of finance at San Diego State.
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Any delay or under-response to a shock due to this discomfort makes a recession much more likely.
The rose-colored view, he says, results from a long expansion that has made a recession seem unthinkable.
The abrupt and large fall in both orders and output reported by IHS Markit and the CIPS clearly makes a recession in the second half of 2016 a real risk.
As well as worrying about excessive austerity, the IMF's report raises concern about "policy uncertainty"—including fears about the break-up of the euro which makes a recession deeper and recovery slower.
There is fear that allowing those securities to plunge in price could disrupt credit markets, alarm investors in everything from hedge funds to money market funds, and perhaps make it harder to borrow money, making a recession more likely.
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CEO of Professional Science Editing for Scientists @ prosciediting.com