Nouriel Roubini, Professor of Economics at the Stern School of Business, New York University and co-author of the book Crisis Economics, was one of the only economists who recognized the housing bubble and predicted the Great Recession.
In a new article,appropriately entitled Double Dip Days, he argues:
The global economy, artificially boosted since the recession of 2008-2009 by massive monetary and fiscal stimulus and financial bailouts, is headed towards a sharp slowdown this year as the effect of these measures wanes. Worse yet, the fundamental excesses that fueled the crisis – too much debt and leverage in the private sector (households, banks and other financial institutions, and even much of the corporate sector) – have not been addressed.
Private-sector deleveraging has barely begun. Moreover, there is now massive re-leveraging of the public sector in advanced economies, with huge budget deficits and public-debt accumulation driven by automatic stabilizers, counter-cyclical Keynesian fiscal stimulus, and the immense costs of socializing the financial system’s losses.
At best, we face a protracted period of anemic, below-trend growth in advanced economies as deleveraging by households, financial institutions, and governments starts to feed through to consumption and investment...
The global slowdown – already evident in second-quarter data for 2010 – will accelerate in the second half of the year. Fiscal stimulus will disappear as austerity programs take hold in most countries. Inventory adjustments, which boosted growth for a few quarters, will run their course. The effects of tax policies that stole demand from the future – such as incentives for buyers of cars and homes – will diminish as programs expire. Labor-market conditions remain weak, with little job creation and a spreading sense of malaise among consumers.
The likely scenario for advanced economies is a mediocre U-shaped recovery, even if we avoid a W-shaped double dip. In the US, annual growth was already below trend in the first half of 2010 (2.7% in the first quarter and estimated at a mediocre 2.2% in April-June). Growth is set to slow further, to 1.5% in the second half of this year and into 2011.
Whatever letter of the alphabet US economic performance ultimately resembles, what is coming will feel like a recession.
The entire article is linked.
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3 comments:
The consumer confidence index dropped to 50.4 in July. After 18 months on Keynesian stimulus and $2 trillion added to the National Debt, consumers are less confident than they were in May 2009 at the height of the crisis. It appears that the only people who are confident about the future are the criminals on Wall Street and the criminals in Washington DC. They are collecting bonuses and hiring like there is no tomorrow. The average American is coming to the realization that the ruling elite are screwing them again. There are no jobs in the real world. Small businesses are closing up shop. Consumers aren’t able to pay down debt. The reduction in consumer debt is from bank writeoffs. Taxes are going up at the local, state and Federal level in the next 6 months.
It ain't gonna be pretty.
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