Beware Of This One-Two Punch

Posted In: Consumers, Economists, Economy, Federal Reserve, Global Economy, Level 3 Assets, Recession, U.S. Government, Wall Street

Yesterday, MarketWatch talked about University of Maryland business professor Peter Morici, who won his second straight “Forecaster of the Month” award from the news service. Morici had the most accurate forecasts of any of his colleagues on 10 major U.S. economic indicators released in October, and capitalized on this notoriety to share the following:

• The Federal Reserve and U.S. Treasury Department are “naïve” about the global economy. Both Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson “look out of their league.”
• Wall Street is infected by “petty corruption.” Morici claims, “There’s a petty corruption that infects Wall Street firms. Everyone feels entitled to make $40 million a year.” The high salaries are justified by “lying to Americans about the value of their creations.”
• The capital markets, the mainspring of the U.S. economy, “are broken.”

Talk about no holds barred. Morici went on to say that, “If the U.S. economy melts down because of this stupidity, everyone will suffer.” In addition, “Whoever is president when that happens will be Herbert Hoover.”

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A runner-up in the October contest was chief North American economist David Rosenberg of Merrill Lynch. The Wall Street Journal is reporting in their MarketBeat Blog post today that Rosenberg is saying the U.S. economy may already be in a recession. He is pointing out that the performance of the University of Michigan’s consumer sentiment index seems to mirror two other instances before the holiday shopping period, in 1990 and 2001, when “both times the economy was officially in recession.”

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