Merrill Lynch Economist Warns Of Multiple U.S. Recessions
According to the Financial Post (Canada) from July 9, David Rosenberg, the chief North American economist at Merrill Lynch, is warning of the possibility of not one U.S. economic recession, but a series of them. The Post’s Jacqueline Thorpe wrote:
Rosenberg has consistently held one of the more pessimistic views on Wall Street, arguing the housing slump and credit crunch will exact a heavy toll on U.S. consumer spending. He believes the data will eventually show the recession started in January.
But he adds it’s not the peak-to-trough decline in real GDP that’s important but the duration. Trouble is, the duration could be Japanese-like (about a decade).
Just like Japan, he says a series of rolling recessions is possible for the next three to five years, making it extremely difficult to time the market. Japanese equities got trashed through the process. At the 1998 post-bubble lows, Japanese bank, construction, real estate and transport stocks were all down 80%, retail stocks were down 50%. The only place to hide was bonds, notes the bond bull.
Rosenberg told the Canadian publication:
We are nervous that we have ended up following in Japan’s footsteps due to the inept fiscal response to the problem. A temporary tax rebate from Uncle Sam to buy iPods tackles a real estate deflation and credit crunch as effectively as the LDP’s (Liberal Democratic Party) “solution” in the early 1990s to build bridges and pave river beds that nobody needed.
The Vapours, “Turning Japanese” (1980)
YouTube Video Link
Source:
“Rosenberg on strike, fed up trying to pinpoint U.S. recession”
Jacqueline Thorpe
Financial Post (Canada), July 9, 2008
October 4th, 2008 at 4:32 pm
Uncle ben was worried about inflation not long ago. Now it is clear our problem is deflation.
I think that the oil price run-up caused by the lack of domestic drilling, along with the growth of China, created an ilussion of inflation. If we drilled here and did not divert corn for fuel, deflation would have been more evident. Proper Fed action would have limited our economic pain.
October 5th, 2008 at 10:56 am
Thanks for the comment Gil.
“Now it is clear our problem is deflation.”
Not so sure. There’s a good argument to be made that the Fed may try to inflate itself out of this financial mess, with deflation taking place later down the line.