AMERICA is on course for another recession that would have devastating consequences for Britain and the rest of the world, a top economist has warned today.
The investment firm looks after millions of pounds worth of British pension savings and has now started to reduce risk amid “signs that things are going wrong,” said Mr Garrick.
He issued a similar warning over the American economy in December 2007 and sees a likeness in conditions then and now.
The expert believes the US economy could start deteriorating next year, and be in a full-blown recession by 2018.
Separately, global think tank the OECD today also warned the US outlook had dimmed and cut growth forecasts to 1.8 percent this year, from its previous forecast of two per cent.
The US economy could be in recession by 2018, said one expert
Speaking to journalists today, Mr Garrick said the corporate credit cycle has turned “vicious”, with weaker growth and lower corporate profits – off the back of both low oil prices and China’s slowdown – now filtering through into a rising number of defaulting loans or so-called delinquencies.
Mr Garrick warned of a “snowball effect” where issues start small and slow, before picking up pace and spiralling out of control.
It means the more ‘delinquencies’, the more banks will start to toughen lending conditions, which in turn will hit growth and profits even harder.
The economist said we could now be in the early signs of the snowball effect.
The US economy is heading for reccsion in 2018, suggest forecasts
But by 2017, the Fed could be faced with a policy dilemma, said Mr Garrick.
Rising inflation and low levels of unemployment will compel the Fed to raise rates, but high levels of debt and defaults would mean it should leave them low.
Source : http://www.express.co.uk/finance/personalfinance/675892/US-economy-recession-drag-down-UK
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