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| English: Chart of the components of United States public and private debt since 1945 as a fraction of GDP. (Photo credit: Wikipedia) |
"The next three to four months we are going to probably have greater uncertainty and the market may test itself one more time," Fink told Reuters during a trip to Tokyo, host to this week's semiannual meeting of the International Monetary Fund.
Behind those jitters is uncertainty over when and how Spain, the latest epicenter of the euro zone debt crisis, might seek financial aid as it struggles with a huge budget gap, soaring debts and the need to reform its economy, Fink said.
But for all of the troubles facing Europe, Fink said just as much time was spent at the IMF meetings talking about the so-called fiscal cliff of expiring tax cuts and looming spending cuts that will hit the U.S. economy early next year unless congress acts.
Failure to come up with a solution could knock U.S. gross domestic product in the first quarter to a 3 percent annual rate of contraction, Fink estimated, based on the current run rate of 2 percent annual growth. That risk is already hurting the economy with CEOs reining in spending and reluctant to hire workers, he said.
On the other hand, a solution could trigger a substantial rally in equities and set the stage for a stronger economy, underpinned by a recovering housing market and a banking system now sound due in part to post-crisis reforms, he said. ... Continue to read.
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