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Former Fed Official Warns of ‘Double Dip’ 

Courtesy of ZeroHedge View original post here.

Former Federal Reserve Bank of Atlanta President Dennis Lockhart was interviewed on CNBC Friday, giving his view of what could be a "double-dip" recession, in the making, if the latest coronavirus outbreak is not contained. 

"I continue to believe that looking forward you have to consider a range of scenarios and among those scenarios would be, obviously, a pessimistic one and that could be a double-dip," Lockhart told CNBC's "Squawk Box Asia." 

"If things go badly with the management of the virus and there's more cascading — which (Thursday's) numbers of initial claims might suggest — then yes, it's possible we have a double-dip. I don't think that's probably the base case, but I think it's still possible," he said.

Lockhart, along with other policymakers and economists, has warned about the increasing risks of another downturn or at least an incoming growth scare. 

He said the economy is in dire need of more significant fiscal support because monetary policy has become widely exhausted, noting there isn't much room for "dramatic increases" in its asset purchase program.

"If there's going to be an effective effort to really ward off a worst-case scenario, particularly for portions of the American public that are most vulnerable, then it's going to come from the fiscal side," he said.

"That theme has been repeated several times by Jay Powell and I completely agree that fiscal action is the most appropriate economic action at this time and we need it."

With the US remaining in the grips of the virus pandemic, a classic double-dip after this summer's bounce in economic growth is becoming more and more likely, especially after the latest 28-day lapse of emergency unemployment benefits and business grants will be the driver for waning consumption in August. 

Financial markets aren't the least bit worried about the prospects of another downturn, mainly because of monetary easing has boosted asset prices sky-high, providing investors with a false sense of a robust recovery. 

But what happens when investors misread the shape of the recovery?

Well, Morgan Stanley's Michael Wilson has that answer, warns of an imminent "growth scare" could cause a correction in markets. 

The countdown for a growth scare has stared – it could be in the coming weeks, or coming months… 


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