Not entirely improbable, but given the fact that such a condition would cause a recession on it’s own merits, the idea of a “double dip” recession isn’t far fetched:
A “perfect storm” of fiscal deficits, rising bond yields, “soaring” oil prices, weak profits and a stagnant labor market could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note today. “It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented.”…
Roubini based his short-term outlook on the worsening condition of the U.S. housing and labor markets, which he called “inextricably linked.” He said a “weak” job market will contribute to another 13 percent to 18 percent drop in house prices, bringing total declines nationally to as much as 45 percent from their peak.
Ireland is already suffering the trauma of cutting back its social welfare state. Other Western nations are facing similar dilemmas, with no real action towards freeing up their economies and unburdening the obligations of the welfare state.
Ironically, it is the United States who is pushing inexorably towards a socialist model that is patently failing in Western Europe, and moving away from the much more liberated and free-market economies that seem to be surviving the twin terrors of globalization and recession.