Friday, May 01, 2009

Roubini on the current state of the economy


The thinkers who predicted early on many aspects of this financial crisis

Nouriel Roubini references several economist in this article.
I certainly recognize that there were a small but significant number of economists, thinkers and analysts who – early on – predicted many of the risks and vulnerabilities that eventually led to this crisis. In many ways I simply connected the dot in these different strands of thinking and warnings.
He also discusses the current state of economic affairs.
We are still in a severe and deep and protracted U-shaped recession that – unlike the forecast of the current consensus economists – will not be over in Q3 but will last until the beginning of 2010. So there may be finally light at the end of the tunnel but later rather than sooner, in 2010 rather than in the second half of 2009. There are still significant downside risks and while optimists speak about green shoots there are still plenty of yellow weeds; and while second derivatives are becoming positive especially in the US but, partially, also in other countries, they are not positive enough yet to suggest that the recession will bottom out in Q3 – as predicted by the consensus – as opposed to some time in 2010. The toxic mess and damage caused by this leverage-driven financial crisis and economic recession – including a brutal shedding of employment that shows no sign of letting up – will take much longer to truly heal the financial markets, the financial institutions and the real economy.
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