Should the U.S. and Europe fall into a recession, which would be unlikely with more monetary stimulus, Mantega said the country had plenty of policy tools it could use to combat a double dip.
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Goldman Sachs economists said in a report on Aug. 12 that there was a one in three chance the U.S. economy would fall into a double dip recession this year.
Data from the Conference Board this morning seemed to remove fears from the market that the consumer may fall with the economy into a double-dip recession this Fall, as retailers prepare for back-to-school season.
Approximately two-thirds of respondents said the economy has slowed, but will not fall into a double-dip recession.
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He says the U.S. will fall into recession within a year and the yield on ten-year Treasurys, now 5.1%, will drop to 3.5% within two.
On the theory that there is now a 1-in-3 chance that the U.S. economy could fall into a double-dip recession, Merrill Lynch analyst Jessica Reif Cohen this morning turned cautious on the entertainment and media stocks.
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Moreover, the last thing it wanted was for Japan to fall back into recession, lest this have a knock-on effect in the rest of the world.
What all that means is that, if the USA enters into a recession, it seems difficult that the rest of the world do not enter into a recession as well, with the unavoidable fall in one of its major causes, the oil price.
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Likewise, a sharp fall in asset prices might push an economy into recession.
Indeed, housing is such an important part of Australian wealth that a big fall in prices could even tip the economy into recession.
The company went into administration last month, after it struggled with a fall in sales during the recession.
In such a scenario, the United States goes into recession, commercial vacancy rates rise, rents fall, and new construction is delayed even longer.
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