What might trigger Ireland`s next recession?

I remember watching a George Lee documentary back in early 2007 which speculated on what might cause the next recession. We know now the trigger was the US sub prime defaults but of course if it had not been that, it would have been something else. Ireland`s property market was a gigantic bubble. I am not saying our economy today is the same as it was then. The stresses are different but some of the risks are the same.

For example, Lee said in 2007 that a weakening US dollar would be bad for Ireland. And, when the US began QE in responce to the sub-prime debacle, the dollar fell and several large US companies laid off thousands of workers here. What offset the weaker dollar eventually was the ECB beginning it`s own QE program and that strengthened the dollar in reletive terms.

But today things are not quite the same as they were in 2007. If the US FED eases off the rate hike pedal, the US dollar will weaken against the Euro. If they don`t, US businesses, individuals and eventually their banks will begin to default. We have already seen the Fitch ratings agency downgrade the US recently, in other words, they are saying there is a slightly higher risk the US will default on it`s bonds. Still, the ratings agencies cannot be trusted as we learned in 2008. AAA or AA+ may be a symbolic difference but even at AA+ one would assume the US would not default in which case the debt ceiling will continue to rise.

History tells us that countries always opt for inflation when faced with a debt crisis. So that means the US will eventually give up the fight against inflation, the dollar will weaken and the US multinationals in Ireland will start to lay off workers and maybe pull out altogether. If that happens, our entire economy will be in trouble. The multi-billion euro budget surplusses will become deficits. Unemployment will rise, not only in the multinationals but all of the local suporting businesses. As people lose their jobs, debt defaults will increase and the banks may find themselves in difficulty again.

But, if these things happen, will the ECB act as it did before? Will it lower interest rates and turn on QE? The Eurozone is not the US. Germany does not want another taste of hyperinflation like it had almost 100 years ago. The Netherlands and Finland would also object. But the PIGS would be crying out for more. Could this be an existential challenge to the EU?

Or, could Ireland`s next recession be triggered by something else? The housing crisis is more a limiting factor to further growth but to upset the apple tart so to speak, the legs would need to be ripped from under our economy. This is why I think a weakened US dollar and it`s effect on US multinationals here could be the trigger. But maybe things can chug along as they are for a while yet because the US is trying to do a balancing act. Their plans seems to be to keep interest rates where they are, after one more hike and hope it will be enough to keep inflation from rising to quickly. That might be result in not too many defaults on loans. But even if they do that, the US is being squeezed slowly between inflation that is too high and businesses that are slowly going bust. How long that that continue?