Smoking Some Green Shoots: 54 Seconds With Dr. Nouriel Roubini

Roubini enjoying the upside of the downturn. 

It's been about 6 weeks since we've posted anything from Dr. Strangelove.  Not much has changed, apparently.  He still sees the recession ending officially in about 6 months, but he expects extremely slow growth (an L-shaped recovery) thereafter, and the possibility for a double-dip back into negative GDP growth next year.

Video, photos and article from Reuters are inside.

See also:

The Roubini Collection

From Reuters:

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.

"That's the challenge the Fed is facing," Roubini said.

He said the central bank did the right thing to avoid an outright depression, but is left with emergency lending programs that are clearly not sustainable.

These factors, Roubini argued, would continue to pressure the U.S. dollar over the medium term.

Asked to grade the central bank's job, Roubini gave the Fed a "D" for missing the crisis altogether and downplaying its possible impact, but a "B-plus" after the credit debacle had unfolded.

"I give them credit for being very creative and very aggressive," he said.

Comments

[DailyBail]

Newest details on Obama's regulatory overhaul plan. Just released 5 minutes ago.

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/16/AR2009061601887.html

[DailyBail]

The Accidental Slumlord

At the height of the housing boom, I became a long-distance landlord. Then my tenants came home to roost.

By Daniel McGinn | NEWSWEEK

http://www.newsweek.com/id/201838

[DailyBail]

Felix Salmon

Financial regulation: The alphabet soup gets much worse

http://blogs.reuters.com/felix-salmon/2009/06/17/financial-regulation-the-alphabet-soup-gets-much-worse/

Do you know a FHC from a BCBS? If not, you’re going to have a hard time wading through the government’s white paper on financial reform, which is full of such things. (An FHC is a financial holding company; the BCBS is the Basel Committee on Banking Supervision. The link is to the WaPo leak of the paper, there might be minor changes in the final document.) This, for instance, is a real sentence from the paper:

The United States will work to implement the updated ICRG peer review process and work with partners in the FATF to address jurisdictions not complying with international AML/CFT standards.

But never fear! Your tireless blogger has waded through all 85 pages, and I’m pretty sure I’ve got the gist of it at this point.

[DailyBail]

Interesting way to deal with industry problems.

British Airways asks staff to work for free

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6510479.ece

[DailyBail]

Medvedev calls for new world reserve currencies

http://news.yahoo.com/s/ap/20090616/ap_on_re_eu/eu_russia_summit_talks_7

[Ain't Bullshittin']

I say America calls the troops home from ALL 4 corners of the globe. Let's see how all the pompous sons a beaches feel about protecting themselves. Dump my dollar and you will live in squalor. America can rebuild from within. It may take years to fully recover but IT CAN BE DONE. Global trade is a rouse because we tried to falsely bring all these Nations up to a higher tier after WW2. The American Empire is crumbling....it's enevatable that we cannot protect the world from itself.

[DailyBail]

"I say America calls the troops home from ALL 4 corners of the globe."

Ron Paul would do exactly that. I agree as well. We can no longer afford a strong military presence overseas. Bring them home.

[R.D. Ferrando]

I agree, Bring them ALL home !! That, would destabilize the REST of the WHOLE WORLD, and SINK the BASTARDS !!! For once, Let's, go it alone ..... PERIOD! We would be the ONLY Survivor, FRIG ALL those UNGRATEFULL BASTARDS, including the WORTHLESS UN !!! Take it from an elderly fellow, ( 78 ), and been to war; This is LONG overdue !!!! Carry-on. RDF

[DailyBail]

RD

Thanks so much for reading my stories and leaving a comment. I really appreciate having someone of your life experience around here.

I like how you write as well. There is some passion in your words. As James would say, that's sharp stuff RD, some sharp stuff.

Keep hanging around and offering your thoughts. They will be most welcome.

steve