Is it Really a Green Shoots Recovery I See?
housing recovery
Nouriel Roubini, a professor at the Stern School of Business, New York University, said there was now “a big risk” that the global economy would slip into a W-shaped recession. Roubini is credited as the prophet of the current financial crisis.
Roubini is now warning of the growing threat of a global, double-dip recession, where the economy briefly recovers before slipping back into contraction. Governments and policymakers are facing the twin threat of both stag-deflation and stagflation, he wrote in the Financial Times yesterday.
This is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialized and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest…
The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending.
In other words, Roubini is confirming what many others have said: that the problem is insolvency, more than liquidity, that the government is fighting the last war and doing it all wrong, and that we should let the insolvent banks fail.
Roubini is also confirming that incurring huge deficits in order to have the federal government itself act as a super-bank is causing a reduction in – and “crowding out” a recovery in – private sector spending.
Professor Roubini said that if the world was able to stave off a double-dip recession, the most likely outcome would be a weak U-shaped recovery, with below trend growth for at least a couple of years.
Much is said about the lack of equity in homes and the lack of liquidity from the few available buyers out there. The economy is dead; all these foreclosures are ruining the state.
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We are facing turbulent times with the credit crunch / liquidity crisis, a very possible recession, hedge funds collapsing, small & large banks experiencing major loses and the ups and downs of the bond and stock markets.
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