We really have a hard time figuring out where Nouriel Roubini stands on the economy these days. Sometimes he sounds optimistic. Other times he’s wildly pessimistic. In a fresh opinion piece at FT, he warns: the risk of a double-dip recession is rising.
First, he cites several reasons for still believing that any recovery will be U-shaped, rather than V-shaped (as has become popular, lately).
- Employment remains weak.
- We’re still facing a solvency crisis, as true deleveraging has yet to occur.
- Countries with current account deficits (like the US) will need their consumers to retrench further.
- The financial system remains severely damaged.
- Corporate profits will remain weak, discouraing companies from hiring new workers.
- Public sector re-leveraging will crowd out the private sector, and stimulus will run out next year
- Without revitalized consumer in “surplus” countries (like China), demand will remain weak overall.
Finally, he gives two reasons to fear the dreaded double dip. The first is the possibility that the Fed will fail (miss the landing strip, so to speak) as it undoes pro-liquidity policies. The second is the likelihood of commodity prices (food, copper, oil) coming back with a vengeance. He believes the global economy could not tolerate $100 oil this time around.
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