L&G Investments warns on fragile US recovery

Legal & General Investments economist Tim Drayson believes US growth remains fragile and its fiscal position unsustainable due to a gaping budget deficit.

Drayson says the US only avoided a depression due to a massive transfer of private sector debt to the public sector, which has now created a huge budget deficit issue. While he says employment growth is likely to improve over the coming months, Drayson believes such cyclical improvement may not last and warns a lack of domestic saving, the excessive reliance on overseas borrowing and chronic fiscal deficits all threaten to undermine the recovery. In order to avoid undermining the economic recovery, Drayson says the Government must tighten fiscal policy - even if such a move is likely ...