Double-dip recession foreseen for US

PressTV

A leading American economist has warned that chances of an emerging second phase of an economic crisis in the US are mounting, as its financial recovery is losing steam. High rates of unemployment also add to the problem. Analysts say the low pace of growth will make unemployment to hang over the economy like a cloud, well through 2011.

Robert Shiller, professor of economics at Yale University, says the world's biggest economy may face the second dip down of a so-called double-dip recession in the near future. “Double dips are rare historically, but this is the kind of environment that makes me worried,” Shiller told The Wall Street Journal.

Double-dip recession occurs when the economy has a recession, emerges from the recession with a short period of growth, but quickly falls back into recession.

Shiller believes that the third quarter of 2010 might be the beginning of the second dip of the recession for the US economy.

The economist added that he suspects the US economy is "teetering on the brink of deflation."

Deflation is a decline in the general level of consumer prices, often caused by a reduction in the supply of money or credit.

The US is ill-prepared for such an event because of the lack of "indexing" in contracts, Shiller said.

Earlier this month, the US Bureau of Economic Analysis released a weaker-than-expected second quarter advance report on the country's gross domestic product.

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