Recession

If the U.S. enters a deep recession, a bailout to Fannie Mae or Freddie Mac could threaten the United States' AAA credit rating according to a statement from Standard & Poor's. Government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac are large in size, have high common equity, and are highly exposed to a deteriorating housing market, leaving them vulnerable to a deep recession. If they go under and need a large cash infusion from the government, it could cost the country 10% more of GDP to service its debt.

Barron's - Is Fannie Mae the Next Government Bailout?
Wall Street Journal - Fannie, Freddie Could Hurt U.S. Credit
Bloomberg - U.S. Rating Threatened More by Agencies Than Bailouts, S&P Says

The threat of a recession occurring at the same time as higher than expected inflation raises concerns about stagflation, a combination of inflation and stagnant growth not seen since the 1970s. Minutes from the January Open Market Committee meeting indicate the Fed will raise rates quickly to avoid inflationary pressures when concerns over slow growth subside. Despite inflationary pressure, investors predict the Fed will ease rates 50 basis points during their next meeting on March 18th.

Snapshot asks, are we or will we experience stagflation?

Joining the chorus of U.S. recession-watchers, the World Bank and the U.N. jumped in with their own analysis. The World Bank sees a finite global impact, as "emerging markets will act as shock absorbers for the global economy, cushioning the impact of the US downturn and ensuring the world continues to grow at a decent rate this year," according to the Financial Times.

The U.N is not so sanguine, writes AFP: "A further slowdown in the world's major economy will hit many of the poor nations hard, as it will slow world trade and put an end to the boom in commodity prices that benefited them over the past years."

World Bank - Global Economics Prospects 2008
Financial Times - Emerging markets 'to help ease downturn'
U.N. - World Economic Situation and Prospects 2008
Agence France-Presse - US slowdown could spark global economic recession
Financial Times - U.N. warns of US recession threat