Monday, July 20, 2009

Dr. Roubini on the Economy: Yes, a Light at the End of The Tunnel, but Its Not Daylight Yet

Dr. Roubini had a handle on the current economic disaster years before it hit the fan. Here is his outlook:


FOR IMMEDIATE RELEASE

July 16, 2009

STATEMENT ON U.S. ECONOMIC OUTLOOK BY DR. NOURIEL ROUBINI


The following is a statement from Dr. Nouriel Roubini, Chairman of RGE Monitor and Professor, New York University, Stern School of Business:


“It has been widely reported today that I have stated that the recession will be over “this year” and that I have “improved” my economic outlook. Despite those reports - however – my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.
“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If as I predicted the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.

“Indeed, last year I argued that this will be a long and deep and protracted U-shaped recession that would last 24 months. Meanwhile, the consensus argued that this would be a short and shallow V-shaped 8 months long recession (like those in 1990-91 and 2001). That debate is over today as we are in the 19th month of a severe recession; so the V is out of the window and we are in a deep U-shaped recession. If that recession were to be over by year end – as I have consistently predicted – it would have lasted 24 months and thus been three times longer than the previous two and five times deeper – in terms of cumulative GDP contraction – than the previous two. So, there is nothing new in my remarks today about the recession being over at the end of this year.

“I have also consistently argued – including in my remarks today - that while the consensus predicts that the US economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%.

“I have also consistently argued that there is a risk of a double-dip W-shaped recession toward the end of 2010, as a tough policy dilemma will emerge next year: on one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant. On the other side, maintaining large budget deficits and continued monetization of such deficits would eventually increase long term interest rates (because of concerns about medium term fiscal sustainability and because of an increase in expected inflation) and thus would lead to a crowding out of private demand.

“While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector; and now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation.

“Also, as I fleshed out in detail in recent remarks the labor market is still very weak: I predict a peak unemployment rate of close to 11% in 2010. Such large unemployment rate will have negative effects on labor income and consumption growth; will postpone the bottoming out of the housing sector; will lead to larger defaults and losses on bank loans (residential and commercial mortgages, credit cards, auto loans, leveraged loans); will increase the size of the budget deficit (even before any additional stimulus is implemented); and will increase protectionist pressures.

“So, yes there is light at the end of the tunnel for the US and the global economy; but as I have consistently argued the recession will continue through the end of the year, and the recovery will be weak and at risk of a double dip, as the challenge of getting right the timing and size of the exit strategy for monetary and fiscal policy easing will be daunting.

More information from Dr. Roubini at: www.rgemonitor.com

Current Reading

  • Midnight Rising: John Brown and the Raid that Sparked the Civil War- Tony Horwitz
  • A Sultan in Palermo - Tariq Ali
  • Hitch-22: A Memoir - Christopher Hitchens
  • Negropedia- Patrice Evans
  • Dead Funny: Humor in Nazi Germany - Rudolph Herzog
  • Exile on Main Street - Robert Greenfield
  • Among the Truthers - A Journey Among America's Growing Conspiracist Underworld - Jonathan Kay
  • Paradise Lost - John Milton
  • What Is Your Dangerous Idea? Thinking the Unthinkable - John Brockman
  • Notes from the Edge Times - Daniel Pinchbeck
  • Fringe-ology: How I Can't Explain Away the Unexplainable- Steve Volk
  • Un Juif pour l'exemple (translated as A Jew Must Die )- Jacques Cheesex
  • The God Delusion - Richard Dawkins
  • Pale King - David Foster Wallce
  • David Bowie: Starman bio - Paul Trynka
  • Tobacco Stained Mountain Goat - Andrez Bergen
  • The Future of Nostalgia -Svetlana Boym
  • Living in the End Times - Slavoj ZIzek
  • FIrst as Tragedy Next as Farce - Slavoj Zizek
  • How to Survive a Robot Uprising - Daniel Wilson
  • Where is My Jet Pack? -Daniel Wilson
  • Day of the Oprichniks - Vladimir Sorokin
  • Ice Trilogy - Vladimir Sorokin
  • First Civilizations
  • Oscar Wilde -Andre Maurois
  • The Beats - Harvey Pekar, et al
  • SDS - Harvey Pekar, et al
  • The Unfinished Animal - Theodore Roszak
  • Friends of Eddy Coyle
  • Brooklands -Emily Barton
  • Abraham Lincoln - Vampire Hunter - Seth Grahme-Smith - Entertaining and historical
  • Dictionary of the Khazars - Pavic
  • Sloth-Gilbert Hernandez
  • War and Peace- Leo Tolstoy
  • Charles Addams: An Evilution
  • Life in Ancient Greece
  • Time - Eva Hoffmann
  • Violence - S. Zizek
  • Luba - a graphic novel by Gilbert Hernandez
  • Life in Ancient Egypt
  • Great Apes - Will Self - riveting and disturbing
  • Lost Honor of Katherina Blum - Heinrich Boll - could not put it down
  • Yellow Back Radio Brokedown - Ishmael Reed (author deserving of new wide readership)
  • Living in Ancient Mesopotomia
  • Landscape in Concrete - Jakov Lind - surreal
  • 'There Once Lived A Woman Who Tried To Kill Her Neighbor's Baby'-Ludmilla Petrushevskaya - creepy stories - translation feels literarily "thin"
  • Mythologies - William Butler Yeats (re-read again & again)
  • How German Is It ? - Walter Abish
  • The Book of Genesis - illustrated by R. Crumb - visionary
  • "Flags" - an illustrated encyclopedia - wish I could remember all of these. Flag culture
  • Sirens of Titan - Kurt Vonnegut
  • Ubik - Philip K. Dick
  • Nobody's Fool - Richard Russo
  • Hitler's Empire - Mark Mazower
  • Nazi Culture - various authors
  • Master Plan: Himmler 's Scholars and the Holocaust - Heather Pringle
  • Eichmann in Jerusalem - Hannah Arendt
  • Living in Ancient Rome
  • Traveling with Herodotus -R. Kapuszynsky
  • Oblivion - David Foster Wallace - Some of his greatest work
  • Infinite Jest - David Foster Wallace - still wrestling with this great book
  • Netherland - Joseph O'Neill - staggeringly great read
  • Renegade - The Obama Campaign - Richard Wolffe
  • Mount Analogue - Rene Daumal
  • John Brown
  • Anathem - Neal Stephenson - love Stephenson but tough slogging first few chapters
  • 7 Deadly Sins
  • ALEX COX - Alex Cox
  • FIASCO by Thomas Ricks
  • I, Fellini - Charlotte Chandler & Federico Fellini
  • Best of 20th century alternative history fiction
  • Judah P. Benjamin - Eli Evans - Confederacy's Secretary of State & source of the W.C. Field's exclamation
  • Moscow 2042 - Vladimir Voinovich - Pre-1989 curiosity & entertaining sci fi read; love his portrayal of Solzhenitsyn-like character
  • Gomorrah - Roberto Saviano - Mafia without the It-Am sugar coating. Brutal & disturbing
  • The Sack of Rome - Celebrity+Media+Money=Silvio Berlusconi - Alexander Stille
  • Reporting - David Remnick - terrific journalism
  • Fassbinder
  • Indignation - Philip Roth
  • Rome
  • Let's Go Italy! 2008
  • Italian Phrases for Dummies
  • How to Pack
  • Violence - Slavoj Zizek
  • Dali: Painting & Film
  • The Gang That Couldn't Shoot Straight - Jimmy Breslin
  • The Good Rat - Jimmy Breslin
  • Spook Country - William Gibson
  • A Blue Hand - The Beats in India - Deborah Baker
  • The Metaphysical Club - Louis Menard
  • Coast of Utopia - Tom Stoppard
  • Physics of the Impossible - Dr. Michio Kaku
  • Managing the Unexpected - Weick & Sutcliffe
  • Wait Til The Midnight Hour - Writings on Black Power
  • Yellow Back Radio Brokedown - Ishmael Reed
  • Burning Down the Masters' House - Jayson Blair
  • Howl - Allen Ginsberg
  • Cat's Cradle - Kurt Vonnegut
  • The Palace Thief - Ethan Canin
  • John Adams - David McCullough
  • The Wooden Sea - Jonathan Carroll
  • American Gangster - Mark Jacobson
  • Return of the King - J.R.R. Tolkien
  • Gawker Guide to Becoming King of All Media
  • Jews and Power - Ruth Wisse
  • Youth Without Youth - Mircea Eliade
  • A Team of Rivals - Doris Goodwin
  • Ghost Hunters -William James and the Search for Scientific Proof of Life After Death - Deborah Blum
  • Dream -Re-Imagining Progressive Politics in an Age of Fantasy - Stephen Duncombe
  • Love & Theft - Eric Lott
  • Exit Ghost - Philip Roth
  • Studio A - The Bob Dylan Reader

Current Listening

  • Alexi Murdoch Wait
  • Wilco Summer Teeth
  • Wilco The Album
  • Carmina Burana - Ray Manzarek (& Michael Riesmann)
  • Polyrock - Polyrock
  • 96 Tears - Garland Jeffries
  • Ghost of a Chance Garland Jeffries
  • Yellow Magic Orchestra
  • Mustang Sally Buddy Guy
  • John Lee Hooker
  • Black and White Years
  • Together Through Life - B. Dylan
  • 100 Days 100 Nites - Sharon Jones & The Dap Kings
  • DYLAN: 3 disc Greatest...
  • Glassworks - Philip Glass
  • Wild Palms - Soundtrack -Ryuichi Sakamoto
  • Dinah Washington - Best of..
  • Commander Cody& His Lost Planet Airmen Live at Armadillo