Photo: flickr/World Economic Forum
NYU economist Nouriel Roubini thinks the idea that economic growth in the U.S. will pick up in the second half of the year is a “fairy tale.”In a new op-ed on Project Syndicate, Roubini discusses various reasons that growth will continue to slow and send the economy toward stall speed going forward.
One of those catalysts for a slowdown could be a plunge in stock prices, according to Roubini:
The gravity of weaker growth will most likely overcome the levitational effect on equity prices from more quantitative easing, particularly given that equity valuations today are not as depressed as they were in 2009 or 2010. Indeed, growth in earnings and profits is now running out of steam, as the effect of weak demand on top-line revenues takes a toll on bottom-line margins and profitability.
A significant equity-price correction could, in fact, be the force that in 2013 tips the US economy into outright contraction. And if the US (still the world’s largest economy) starts to sneeze again, the rest of the world – its immunity already weakened by Europe’s malaise and emerging countries’ slowdown – will catch pneumonia.
Read more at Project-Syndicate.org.