The case for a second recession
The markets have largely shrugged off damaging world events until recently. Now the possibility of another downturn is too stark to ignore.
First, he looks at the combination of weird slams to the global economy this year. The earthquake in Japan disrupted some of the world's supply chains. The turmoil in the Middle East has contributed to the runup in oil prices and the corresponding spike in gasoline prices (both of which, thankfully, have come down).
Add to that the financial instability in Greece, Ireland and Portugal. And don't forget the rising prices for food and commodities, stoking concerns about high inflation.
The markets seemed to discount these shocks until recently, Roubini writes in Slate. Investors largely shrugged off the events, sending markets up and up. But that changed at the end of April, when a more persistent correction set in, he added.
So now it's unclear whether that persistent correction will turn into a second recession. Is the global economy merely in a soft patch, full of temporary speed bumps but headed to another rally in the second half of the year?
Roubini says that factors pointing to a more persistent slump. Some European countries are facing actual insolvency, and with public and perhaps private debts in Greece, Ireland and Portugal needing restructure.
The U.S. has its own problems, including deleveraging, weak job creation, an ongoing housing slump, an unsustainable deficit, a monstrous federal debt burden and serious financial woes at state and city levels.
The U.K. has had flat economic growth, he adds. Japan is slipping into an earthquake-induced recession.
If the latest global economic data reflect something more serious than a hiccup, and markets and economies continue to slow, policymakers could well find themselves empty-handed. If that happens, the risk of stall speed or an outright (second) recession would rise sharply in many advanced economies.
dav and luke - no worries. you are approaching a scientific analysis of possibility and probability by a very smart guy with a doctorate in economics - the overall macroeconomic realities are simply beyond your ken.
it all begins with passage of a debt ceiling increase, budget, and deficit reduction according to the bi-partisan debt reduction commission report (which you obviously have not yet read). the six republican congressman who crafted the report and agreed that tax revenues must be increased are now apparently frozen out by boehner and voting party-line as usual. we have term limits - vote these idiots out of office next time you go to the polls. and by the way, enlightened capitalism includes transition / temporary transfer payments to those without jobs. only the long-term scofflaws who refuse work should be excluded - don't throw the baby out with the bathwater for the there but for the Grace of God go thou.
now lukester. ok "for those in pain, the recession is over and we are entering a period of long, slow, painful recovery because of our stupid election decisions over the past thirty years." there are plenty of jobs for those who get retrained, those who enter the bottom rung of healthcare (nurse aids) and for those willing to start over and for those willing to relocate and work hard (mining, dakota's, etc.). whining will not improve anything nor will "cutting spending" or "cutting taxes" or "throw out the donkeys." re-read the article and pay close attention to the long-term systemic problems that we created for ourselves by having a standard of living far beyond our means and the rest of the world. time to man-up and put a lid on the whining. "they" are not trying to convince anyone - these are the facts jack - adapt and survive. this is, after all, America the Land of Opportunity ..... remember?
we have the ability to recover and be great again ... but we must change NOW ....
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