The word "recession" is haunting America and hence the world. With the tech-led industry enduring its first bear market most of the firms are in utter distress. Economists assert that the US is heading towards a recession after a long and excessive boom. Implications of the mainstream analysis espoused by most central bankers view that there is something like a normal degree of resource utilization level above which the economy is likely to get accelerating inflation. During a boom, rapid money supply growth feeds directly into higher output and higher asset prices, thus temporarily disconnecting the link between money and inflation. The ongoing tech-led recession is different from the earlier recessions, led by the manufacturing sector. In this case, the investments of the financiers were typically on software packages, paying salaries of employees, marketing and other intangible services. Suddenly, when the bubble burst and the firms disappeared, the financiers were left with nothing to recover. It is true that the tech-led recession in the US economy is fundamentally different from earlier recessions led by the manufacturing industry. The question is how to handle such a recession?

In the tech-led economy, corporates have little leverage, stock markets have witnessed heavy investments from households and technology has globalized the markets. These elements are rendering the old policy tools ineffective. Are the traditional economic policy tools that Fed chairman is using unable to cope with the present economic downturn? Can the central banks any longer stay indifferent to the asset price bubbles and stock market overvaluation? Are there any new policy tools that can be useful in controlling the present economic turmoil?

Economists still believe that the changes brought about by tech phenomenon do not make conventional policies less effective. The traditional tools laid by the Fed Chairman are empirically tested and the present span of economic downturn is too short a time period to conclude anything against its success. However, the present recession proves that the techs are not immune to business cycles. The sector is only undergoing a correction that has evolved from excess capacity and overvaluation of stocks.

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