Tiresome celebrity economist Nouriel Roubini made headlines the other day by predicting ... what?
A “perfect storm” of fiscal woe in the U.S., a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy, New York University professor Nouriel Roubini said.
There’s a one-in-three chance the factors will combine to stunt growth from 2013, Roubini said in a June 11 interview in Singapore. Other possible outcomes are “anemic but OK” global growth or an “optimistic” scenario in which the expansion improves.
“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”
A "perfect storm" may happen (1 in 3 chance) by 2013 at the latest, or it may not, in which case we'll be weakened but OK, or there's also an optimistic scenario to consider in which Cinderella puts on the slippers, goes to the ball, and if I recall correctly, there's something about marrying a prince.
Nouriel Roubini? What a jackass!
Perma-bear economist David Rosenberg, who has a very low tolerance for bullshit, was a bit more specific. There's a 99% chance of a recession here in the United States "by 2012" (video below). Dave gave himself 1% of wiggle room. That was wise because the government sees no good reason why our statistical recovery should not continue.
Writing at MSN Money, Jim Jubak talks about The coming global financial crisis as if he were mediating the dispute between the wishy-washy Roubini and the pessimistic Rosenberg. He's with Roubini on the timing, but agrees with Rosenberg that there is no doubt about the outcome.
Politics virtually guarantee that the global economy won't go into crisis in 2011. Politics make it extremely unlikely that the global economy will slow down as much as the market seems to fear. Politics, in fact, put a safety net under the global economy this year.
And politics also virtually guarantee another, deeper crisis in 2012 or 2013. I'd bet 2013.
How come? You see, just about every politician in the world is trying to kick an economic problem down the road into 2012 or 2013. I think they'll succeed in postponing the day of reckoning in 2011 using a combination of funny accounting, additional spending and subsidies.
But the price for that postponement will be that problems will be bigger and harder to truly solve in 2012 or 2013 than they are now. And that will raise the odds that the global economy will face another serious crisis — just five years or so after the last one.
This kick-it-down-the-road effort is most obvious in the eurozone, where the effort to put together a new rescue package for Greece really comes down to putting off a Greek default from 2012 to 2013 or 2014.
But the effect is also visible in the United States, where I think the most likely result of negotiations in the U.S. to raise the debt ceiling will be to kick the problem into the 2012 election campaign, with a "solution" postponed to 2013. You can also see it in China, where the leadership that takes over in 2012 and 2013 from President Hu Jintao will be extremely reluctant to rock the boat until it's firmly in power.
Altogether, this politics of delay means that in 2011 the global economy will get enough stimulus to keep growth at the relatively high levels that politicians need to keep voters reasonably happy. Politicians won't even think about making the tough choices that might inhibit growth until well into 2012.
Well into 2012 means sometime after Tuesday, November 6, 2012. This is a good time to remind Jubak and everyone else that politics is irrelevant to America's fate, barring some kind of miracle. And I don't believe in miracles. In this context, I thought you might enjoy the first paragraph of David Brooks' latest column in the New York Times.
I’ll be writing a lot about the presidential election over the next 16 months, but at the outset I would just like to remark that I’m opining on this whole campaign under protest. I’m registering a protest because for someone of my Hamiltonian/National Greatness perspective, the two parties contesting this election are unusually pathetic. Their programs are unusually unimaginative. Their policies are unusually incommensurate to the problem at hand.
And you thought Thomas Friedman was dumb.
It's not as if politicians can do anything but make our economy worse, as Jubak points out. You can forget about additional fiscal stimulus. More monetary stimulus (QE3) may be coming, but all that's going to do is jack up your food & energy costs. Politicians can't, or in most cases won't, fix anything that's still fixable. If those in Washington can avoid making matters worse until after the 2012 elections, they will certainly do so.
Think of the decade 2008-2018 as an economic football game that working Americans are going to lose by a very wide margin. (I don't even want to speculate about what will happen after 2018.) The rich guys hired all the ringers. They own all the refs. And it's their stadium. It's still early in the 2nd quarter of that game, we're not even at halftime yet. There's a lot more pain to come.
Remember, we are watching America's transformation into a third world country in real time.
I met a devil woman, she took my heart away
She said I had it comin' to me, but I wanted it that way
I think that any love is good lovin'
And so I took what I could get, mmm
Oooh, oooh, she looked at me with big brown eyes
You ain't seen nothin' yet
B-B-B-Baby, you just ain't seen nothin' yet...
Here's David Rosenberg on Bloomberg. Our bonus video featuring Bachman Turner Overdrive follows.