Deja vu all over again for the economy?

The U.S. Federal Reserve building in Washington DC after Standard & Poor's cut the US rating from its top-flight triple-A one notch to AA+.

JEREMY HOBSON: So now that we're back in 600 point drop territory, people are talking about whether we're heading into another recession. And how similar this current market crisis is to the one that we experienced back in 2008. And what can be done about it.

For that part of the story, let's bring in Marketplace's Jeff Horwich. He joins us live. Good morning.

JEFF HORWICH: Good morning, Jeremy.

HOBSON: Well, Jeff, how similar is this situation to the one we had after Lehman Brothers collapsed?

HORWICH: Well, it's similar in some superficial ways. Certainly you can think of yesterday as our Lehman Brothers wake-up moment. There's a critical difference. That recession was a crisis of swagger, overconfidence. This time it's quite the opposite: We're psychologically wounded -- and our confidence took a blow. Economists can't really find a better explanation for what happened in the markets yesterday, since S&P's downgrade didn't really tell investors anything they didn't already know. Also, compared with right now, 2008 in hindsight looks like a golden age of political unity -- if you can believe that. Congress, the president, everybody swung into action to prevent the worst. This time, S&P says our big problem is that our politicians need to compromise to fix our public finances, and what happens? Everybody just digs in even deeper.

HOBSON: OK, well the Federal Reserve is going to meet today - and a lot of people are looking to the Fed to come to the rescue. What can the central bank do?

HORWICH: Get ready for Quantitative Easing 3 -- QE3 -- or at least maybe QE 2.1. That's when the Fed started buying Treasury bonds last November to juice the economy. It's really too soon to expect a bold new course of action today. But we can expect the Fed to continue to get creative, since the usual tools are just about exhausted -- interest rates are basically at zero. It's a little comforting to remember Ben Bernanke has in some ways been training for this moment his whole life. The guy's an expert on what happens when the economy hits a rough patch just when government goes into austerity-mode. That time, of course, they called the Great Depression.

HOBSON: And hopefully it won't be anything like that this time. Marketplace's Jeff Horwich, thanks so much.

HORWICH: You're welcome.

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