There’s nothing like a recession to test the mettle of a new government so Kevin Rudd should be keeping a watchful eye on developments in the United States.

The New York Times on Sunday had a cheerful little section on its op-ed pages called “Are We in a Recession?” where six experts gave views ranging from “The Facts Say No“, by Marcelle Chauvet and Kevin Hassett to “Bet the House on It“, by Laura Tyson. It was pretty much a fifty-fifty split and that is almost exactly where the market is currently putting the chances.

Stephen S Roach, the chairman of Morgan Stanley Asia, was one of those coming down on the side of recession being inevitable and if he is right then the Australian Government really should start worrying.

“Consumers will have to resort to spending and saving the old-fashioned way, relying on income rather than assets even as mounting layoffs will make income growth increasingly sluggish,” Mr Roach wrote.

“For the rest of the world, this will come as a rude awakening. America’s recession is likely to shift from homebuilding activity, its least global sector, to consumer demand, its most global. There is hope that young consumers from rapidly growing developing economies can fill the void left by weakness in American consumers. Don’t count on it. American consumers spent close to $9.5 trillion over the last year. Chinese consumers spent around $1 trillion and Indians spent $650 billion. It is almost mathematically impossible for China and India to offset a pullback in American consumption.”

If that scenario is not troubling enough, then contemplate Mr Roach’s concluding remarks and hope he is wrong:

Once the current crisis subsides, the economy will require the tight money of higher interest rates — the only hope America has for breaking the lethal chain of endless asset bubbles.