Would a recession right now hit harder or be milder than 2008? As stocks dropped 5% on the news of the credit downgrade, a sense of doom and deja vu emerged. But, these two articles point out there are important differences this time. The Federal Government can’t afford to come in and save the day again, either politically or financially. (The jury is still out on the effectiveness of the Stimulus Plan. Do you know anyone personally that it created a job for? Or whose situation is better as a direct result of it?) Interest rates are already rock bottom so we don’t have a Federal Reserve chairman to play white knight like Alan Greenspan did so many times. Corporations have cash reserves they didn’t have then, so, they are less likely to enact massive layoffs or fold up shop. While Americans don’t have as much personal debt as they did in ’08, they’re still not spending, except maybe on cars. And that spike in auto sales in July could have been motivated by a sense that credit markets would tighten in the event of a downgrading of our credit rating.
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