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Roubini: 2009 Global Economic Outlook - so far

by whataboutbob Fri Apr 24th, 2009 at 04:28:51 AM EST

I'm not sure if this is Roubini's blog, but he posts here at the RGE Monitor regularly, and I think this is a good economic resource for us (especially as Roubini has predicted most of the financial crisis accurately). From today:

The global economy is in the middle of a synchronized contraction that will push global growth into negative territory in 2009 for the first time in decades. This will be the worst financial crisis since the Great Depression and the worst global economic downturn in decades.  Global trade volumes face their sharpest contractions of the postwar era - trade is expected to contract 12% in 2009 due to the severe and prolonged global demand slump, excess capacity across supply chains and the continued crunch in trade finance.

Many analysts and commentators are pointing out that the second derivative of economic activity is turning positive (i.e. economies are still contracting but a slower rather than accelerated rate) and that green shoots of an economic recovery are blossoming.  RGE Monitor's analysis of the data suggests that the global economic contraction is still in full swing with a very severe, a deep and protracted U-shaped recession. Last year's economic consensus forecast of a V-shaped short and shallow recession has vanished.  While the rate of economic contraction is slowing compared to the free fall rates of Q4 of 2008 and Q1 of 2009, we are still a long way away from the economic bottom and from a sustained recovery of growth.  In particular, in Europe and Japan there is little evidence of a positive second derivative of economic activity. (copyright 4-23-09, RGE Monitor)

Another voice of hard reality...

tip jar for Rubini.

Anyone got further comments on this?

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Thu Apr 23rd, 2009 at 08:18:11 AM EST
European Tribune - Roubini: 2009 Global Economic Outlook - so far
deep and protracted U-shaped recession
"L", that's the new U.
by Bernard (bernard) on Thu Apr 23rd, 2009 at 03:13:02 PM EST
[ Parent ]
...with h/t to ARGeezer.
by Bernard (bernard) on Thu Apr 23rd, 2009 at 03:19:50 PM EST
[ Parent ]
George Soros is calling a "square-root recovery":

US Banks 'Basically Insolvent': Soros - Economy * US * News * Story - CNBC.com

The recovery will look like "an inverted square root sign," Soros said. "You hit bottom and you automatically rebound some, but then you don't come out of it in a V-shape recovery or anything like that. You settle down--step down."

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Fri Apr 24th, 2009 at 05:27:52 AM EST
[ Parent ]
Here's another piece, from the other day:

Investors are talking of 'green shoots' of recovery and of positive 'second derivatives of economic activity' (continuing economic contraction is the first, negative, derivative, but the slower rate suggests that the bottom is near).

As a result, stock markets have started to rally in the US and around the world. Markets seem to believe that there is light at the end of the tunnel for the economy and for the battered profits of corporations and financial firms.

This consensus optimism is, I believe, not supported by the facts (...)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Thu Apr 23rd, 2009 at 12:02:18 PM EST
I've been watching that, too.  I do think the positive second derivative is relevant, but I don't think it suggests that the bottom, let alone recovery, is right around the corner.  It's positive, but not by much, and the rate of decline is still very, very steep.

There will be some recovery in 2010.  I think -- or if I had to guess, my guess would be -- it should bottom out around the end of 2009.  But we'll see.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Apr 24th, 2009 at 07:49:41 AM EST
[ Parent ]
Washington Post:

Nouriel Roubini, a professor at New York University who as far back as 2006 predicted a U.S. economic collapse triggered by a housing bubble, said in an interview that the financial crisis has shown that "different countries grow in different ways, and nobody has the monopoly on that type of wisdom." While he does not expect any immediate change in the international monetary system, he said, in five to 10 years "the Chinese currency could be the new reserve currency."
by Magnifico on Thu Apr 23rd, 2009 at 04:52:25 PM EST
But do the Chinese want to have a reserve currency? What's in it for them? Haven't they been able to capture so much American industry precisely because the US had a reserve currency but lacked any serious fiscal or industrial policy?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Apr 25th, 2009 at 11:10:51 AM EST
[ Parent ]
Synchronized?  I would submit that it's pretty chaotic with multiple strong attractors.  Sort of like a comet swinging through a solar system with binary stars and several gas giant planets.  Other than that, Roubini is, as usual, spot on.
by rifek on Thu Apr 23rd, 2009 at 07:38:43 PM EST
Or perhaps like the single attractor of gravity acting on a set of billiard balls when the slate table is suddenly removed from below them.  The differences will largely consist of the nature of the various surfaces onto which they fall.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Apr 23rd, 2009 at 10:33:37 PM EST
[ Parent ]
The IMF reports Calculated Risk: IMF: Global Synchronized Cliff Diving.

The global crisis won't be solved until...

by das monde on Fri Apr 24th, 2009 at 11:18:04 PM EST
[ Parent ]
End of Economic Gloom? Not as Early as You Wish.

From an April 20 blog which may be accessed in its entirety:

It is said that the International Monetary Fund, which earlier this year revised upward its estimate of bank losses, from $1 trillion to $2.2 trillion, will announce a new estimate of $3.1 trillion for US assets and $0.9 trillion for foreign assets, figures very close to my own.

By this standard, many US and foreign banks are effectively insolvent and will have to be taken over by governments. The credit crunch will last much longer if we keep zombie banks alive despite their massive and continuing losses.

He then notes three reasons why the current rally is a bear market rally:

1.)   Macro-economic indicators will be worse than expected and growth slower to reappear.

2.)   Corporate earnings and profits will not rebound as quickly as the consensus estimate and deflation combined with bond defaults will limit pricing power.

Third, financial shocks will be worse than expected.

At some point, investors will realise that bank losses are massive, and that some banks are insolvent. Deleveraging by highly leveraged firms -- such as hedge funds -- will lead them to sell illiquid assets in illiquid markets. And some emerging market economies -- despite massive IMF support -- will experience a severe financial crisis with contagious effects on other economies.

His conclusion seems to try to avoid being too alarmist, but is tepid at best:

There may be light at the end of the tunnel -- no depression and financial meltdown. But economic recovery everywhere will be weaker and will take longer than expected. The same is true for a sustained recovery of financial markets.  (My bold.)
 In other words, the light at the end of the tunnel may indeed turn out to be a train.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Apr 23rd, 2009 at 11:01:21 PM EST

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