Roubini: We're in a U-shaped Recession

Dr. Doom, aka Dr. Realist, has an interview with Newsweek/Washington Post writer Lally Weymouth.

Roubini says:

No, I am not Dr. Doom. I am Dr. Realist. I don't believe we are going to end up in a near-depression. Six months ago I was more worried about an L-shaped near-depression. Today, after the very aggressive policy actions taken by the U.S. and other countries . . . we are, instead, in the middle of a U.

Roubini: Suckers and Fools

Roubini stays negative. Those betting on the Dow hitting 6,500 might be right:

Roubini: The emerging consensus among economists is that growth next year will be close to the trend rate of 2.5 per cent.
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. Indeed, I expect that while the rate of US contraction will slow from -6 per cent in the last two quarters, US growth will still be negative (around -1.5 to -2 per cent) in the second half of the year (compared to the bullish consensus of +2 per cent).
Moreover, growth next year will be so weak (0.5 to 1 per cent, as opposed to the consensus of 2 per cent or more) and unemployment so high (above 10 per cent) that it will still feel like a recession.

Economy 'Spiraling Down More Slowly'

That's the most positive statement heard from economist Nouriel Roubini on the crisis. We can't keep score of the recovery like a basketball game, but we just made a three-point shot.

And here's what looks like a turnover:

Some analysts suggest that the second derivative of growth is turning positive, that means that although the economy is spiraling down, it is doing so more slowly, the first step towards stabilization(Economist). However even if it does so, the recovery may well be very sluggish in part because synchronized global recessions and those accompanied by financial crisis tend to be severe and forestall quick recoveries (IMF)

Roubini's Global EconoMonitor: Deflation and Stag-deflation Coming Soon

This is some scary stuff that President Obama and the rest of us will be dealing with next year.

From RGE - Nouriel Roubini's Global EconoMonitor, chosen as one of the world's best economics websites delivering "ahead-of-the-curve global economic insights":

(L)ast January I argued that four major forces would lead to a risk of deflation (or stag-deflation where a recession would be associated with deflationary forces) rather than the inflation risk that at that time – and for most of 2008 – mainstream analysts worried about: slack in goods markets, re-coupling of the rest of the world with the US recession, slack in labor markets, and a sharp fall in commodity price following such US and global contraction would reduce inflationary forces and lead to deflationary forces in the global economy.

How have such predictions fared over time? And will the US and global economy soon face sharp deflationary pressures? The answer deflation and stag-deflation will in six months become the main concern of policy authorities. Let me now explain in more detail why…

The political ramifications if Roubini is at all correct in his assessment will see new policy prescriptions from a President Obama constituting a new New Deal that will have Republicans screaming into the next century.