Economic stutter steps?

Roubini sees weeds amid green shoots


The U.S. economy will not recover until the end of this year, and even then growth will remain meek and vulnerable to higher interest rates and commodity prices, economist Nouriel Roubini said on Tuesday.

Roubini, who rose to prominence for predicting the global credit crisis, tore down the "green shoots" theory that a rebound is imminent, saying there was a significant risk of a "double-dip" recession where the economy expands slightly only to begin contracting again.

"In addition to green shoots there are also yellow weeds," he told the Reuters Investment Outlook Summit in New York.

He pointed to the growing divergence between business sentiment surveys, which have been improving in recent months, and industrial production, which is down sharply and receded another 1.1 percent in May.

Roubini, the head of economics research firm RGE Global Monitor, said the U.S. jobless rate, already at a 26-year high of 9.4 percent, would reach 11 percent before it begins to ease. He added that he saw few engines for growth given that U.S. consumers are tapped out

As a result, Federal Reserve policy-makers, whom Roubini says completely missed the magnitude of the crisis at its inception, face an unenviable set of policy choices.

He said weak growth would allow the U.S. central bank to leave interest rates near the current rock-bottom levels for the foreseeable future. Eventually, however, trillions of dollars of unprecedented emergency measures to heal the financial system will need to be mopped back up to prevent an upsurge in inflation.

Rampant inflation could lead to negative economic cycles like the ones that plagued much of the industrialized world in the 1970s.

Comment: As I recollect 6 months or so ago they were talking about an economic recovery mid-2009. Well we missed that! Compare previous posts:

11.17.2008: Recession half way over?

the U.S. economy entered a recession in April and that it will last 14 months

10.20.2008: Cusp of harsh recession?

Many experts expect unemployment will soar from its current level of 6.1 per cent and worry it could go above 8 per cent. The Fed now thinks that unemployment will rise above 7 per cent and is likely to peak at about 7.5 per cent

Reality: NYTimes 06.05.2009: "The unemployment rate rose to 9.4 percent in May, the government says"


  1. Hey Jim, we had better tighten our seat belts because I see nothing but bad days ahead! However the EXPERTS say that the economy will bottom out August or the 4th quarter. Then the 1st half of 2010 will see moderate growth. I am torn as to whether I want the economy to rebound for many reasons.
    First, if the economy rebounds before the mid-term elections then the democrats and the President will take the accolades and win even more congressional seats.
    On the other hand, I do not want to see the economy continue to reel for obvious reasons including my wages.
    Second, if the economy does rebound soon then the government and Americans will go back/continue to/in reckless spending.
    On the other hand, I'd hate to see the continued decreased production in this country.
    Third, I do not want lay people to not learn from this recession because it went away in just two years.
    On the other hand, I do not want to continue to see neighborhoods demolished.
    So I am as torn as one can be on the economy and its possible rebound.

  2. Hye Jim,
    The experts say that the economy might start rebounding in the 4th quarter or the first half of 2010.
    I am torn on whether I want the economy to rebound. If it rebouds before the mid-term elections, then President Obama and his democrats will take the credit.
    On the other hand, if the economy does not rebound then people will continue to suffer and unemployment will continue to rise.
    However if the economy rebounds too quickly, then Americans will spend recklessly again. Not to mention that the gov't will continue its reckless spending with renewed exuberance.
    On the other hand, I do not want to see my wages decrease and production to continue to decrease.
    However, if the recession lasts just 2 years, then the laypeople will not learn their lesson.
    On the other hand, if the recessioncontinues for another year plus then we will see major hunger issues.
    So my thoughts are that we need to somehow fix the economy as a people not as a gov't, so that the president can't take credit.


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