Wednesday, April 15, 2009

Dr. Doom Tells It the Way He Sees It

One thing you have to say about Nourel Roubini, he tells it the way he sees it. At RGE Monitor, where it appears President Obama's chief economic adviser, Larry Summers, appears to have been a silent partner, Roubini lays it on the line:
As I have argued over and over again I am not a perma-bear and will be the first to call for a sustained economic recovery and recovery of the financial markets when I see one. And while now the real economy is not any more in the L-shaped free fall in which it was in Q4 of 2008 and Q1 of 2009 (second derivatives are turning positive) we are still in the middle of a severe U-shaped recession that will last much longer than what expected by the current consensus that sees positive growth by Q3 of this year and growth close to potential (2% plus) next year. We at RGE (our 200 page Global Economic Outlook will be out in two weeks) instead see the US recession lasting until at least Q4 of this year (still -1.5% growth by Q4) and the positive growth next year being so low (0.5%) and the unemployment rate rising to 10% by the summer of this year and peaking well above 11% next year that it will feel like a recession even in 2010 even if we are technically out of it some time next year. The latest awful numbers on retail sales, job losses, initial claims, PPI deflation and business inventories are dashing the delusions of the optimists that there is light at the end of the tunnel already by Q3 of 2009. We don't see any meaningful evidence that the economy will bottom out before 2010.
I'm not quite sure how Roubini reaches these conclusions.I have always viewed him as some kind of trend trackerer. As far as policy prescriptions, he seems to be some kind of Keynesian socialist. He's for big spending and the nationalization of banks.

He used to be a pretty good data hound so I am surprised by his continued negativity. Given his Twitter reports about his recent travels, maybe he hasn't had time to study the numbers in detail since his new fame and worldwide demand. Or, maybe, his former silent partner has silently tipped him off about one of the banks in the stress report. But for now, I have to give the award for best Keynesian data hound to Paul Krugman.

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