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Sunday, April 26, 2009

Nouriel Roubini On The Economy

I take this guy seriously, how can you not.

The most relieving part of his interview is that he now believes the recession is primarily U shaped and not L shaped. In other words we down bottom out and then remain on the bottom. Instead he sees a revival. The difference between Roubini and the MSM is that Roubini sees the bottom occurring in a year not in the fourth quarter.

Newsweek: 'I Am Dr. Realist'
...I believe that the rate of economic contraction is going to slow from minus 6 percent in the last two quarters to minus 2 percent by the fourth quarter. Next year, I believe that the growth rate is going to be 0.5 percent for the U.S. average. Even if we are technically out of a recession, we are going to feel like we are in a recession. The bottom of the economy is not going to be in three months, but rather toward the beginning or middle of next year.

...after the stress tests it is going to be obvious that even some of the largest banks are so fundamentally in trouble that you cannot buy their toxic assets. You need to take over these banks on a temporary basis, clean them up and then sell them back to the private sector.

...I would argue that even the latest market rally is a bear-market rally.

4 comments:

Glynn Kalara said...

U shaped. I say it's more like the bottom of a large Ocean and we haven't reached the bottom of that ocean yet. Then we have a very long journey at the bottom before we reach the next land. That new land will be the new economy that rises from the destruction and decay of this one. Yrs. lie ahead of awful times for many. What society will look like as we re-emerge is going to be interesting.

Jim Sande said...

Realistically I think you are right, long time to go.

I think in terms of economists, this guy would tend to err on the more pessimistic side of things. So when he says recovery next year, I see this as positive, in a way I find it surprising.

Glynn Kalara said...

Ok, but I'd like to know where are these new jobs coming from? In the BV$H era the economy was pumped up by military spending and direct Gov't hires. For all the GOP's whining about BIG GOV'T, when in power these guys make sure everyone they know gets a Gov't job and civil service protection along with it. The small Gov't talk like term limits, balanced budgets and the rest is just so much talk to get elected. Reagan and BV$H 2 presided over an enormous expansion of the Fed. Gov't. So hiring more Gov't people isn't much of an option.
Here's a little statistic to chew on. In 1932 Gov't employment ( all Gov't employment) in then U.S. was at around 10% of the jobs. Today it's 50+%.

Jim Sande said...

yikes 50% , I gotta check this out.