America just got rocked with two big announcements that bode poorly for the future. First, Morgan Stanley is predicting a recession; we’re in the early throes of it already.

From the article:

We’re changing our calls for US growth and monetary policy.  Since the shock of tighter financial conditions surfaced in August, we’ve incrementally reduced our outlook for future growth.  But the time for incremental changes is over.  A mild recession is now likely: We expect domestic demand to contract by an average 1% annualized in each of the next three quarters, no growth in overall GDP for the year ending in the third quarter of 2008 and corporate earnings to contract by 5-10% over that longer period.  Three factors have tipped the balance to the downside: Financial conditions continue to tighten, domestic economic weakness is broadening into capital spending, and global growth — for us, long the key bulwark against a downturn — is slowing.

Morgan Stanley predicted a Federal fund rate cut of 25 bps this week, and 75 bps more over the next 7-9 months. They were right about the first cut, and gave the following reasons for it:

• Tightening financial conditions, including reduced credit availability;
• A coming weakness in business capital spending;
• Slowdowns in Europe and Japan.

Piling on, the Congressional Budget Office now says our federal budget is unsustainable:

The United States is operating on an unsustainable federal budget that is bound to seriously damage the economy as federal debt grows much faster than the economy, the Congressional Budget Office said today.

Unless the federal government significantly changes its fiscal policy, providing healthcare to the high number of aging Americans will cripple the U.S. economy, said the CBO long-term budget outlook, released today.

Combine all of this with the recent hyper-devaluation of the US dollar and the only conclusion is that America is in for some tough times.