Nouriel Roubini used to be known Dr. Doom. These days, however, he insists he is a “realist.”
What does that mean? Well, it means that he doesn’t think we’re in for a V shaped recovery but he doesn’t think we’re going L shaped either.
Appearing on CNBC’s Squawk Box this morning, he said we’re headed for an anemic, U-shaped recovery. Why not a V? Here are his reasons:
1. labour market is still awful, labour income and consumption down.
2. U.S. consumer is shopped out; they save more, consume less.
3. Corporate sector- glut of capacity. Utilization is 69%
4. Financial system is damaged, credit growth is limited, can’t finance residential investments
5. Fiscal stimulus will be a drag, and lead to crowding out of product spending
6. Overspending countries like U.S. are now spending less, and oversaving countries like China, Japan, Germany are not increasing their private domestic consumption to compensate for falling U.S. demand.