U.S. recession very likely to return, investor John Taylor says

U.S. recession very likely to return, investor John Taylor says

Another U.S. recession is looming next year despite the quantitative easing implemented by the Federal Reserve according to investor John Taylor of FX Concepts. He expressed this prediction about the economy during the Reuters Investment Outlook Summit on Monday. If a recession happens, it would be favorable to the dollar and weigh on commodities. “It’s a new recession. We’re already growing, but the numbers show that the U.S. government is still the primary creator of this growth,” said Taylor. “I would argue that by the middle of next year, we will be in a recession and our fiscal hands will be tied.”

The prediction by Taylor, who runs the biggest currency hedge fund in the world, mirrors that of the remarks made by Fed Chairman Ben Bernanke on “60 Minutes,” where he said more bonds purchases may be made if the high U.S. unemployment does not decline soon and the economy remains weak next year. The economy expanded a lowly 2.5 percent during the third quarter, not strong enough to add more jobs and reduce joblessness in America.

Analysts and investors are looking closely at the euro zone which is currently burdened by heavy debt. Taylor says the euro may collapse amid the pressure it has been getting. He questioned the adequacy of the bailout plan by European Union finance regulators. “What Europe has done is not enough. They have to have Eurobonds,” he said. “You can’t lend money to Ireland or Greece. You’re just piling on more debt to them, and it’s getting harder and harder to repay.” Taylor added that commodities would suffer a setback in 2011 as another U.S. recession develops.

Posted by James Fried on Tuesday December 07 2010, 12:54 AM EST. Ref: Reuters. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0