< HOME  Friday, August 25, 2006

'US recession will be nasty and deep'

The United States is headed for a recession that will be "much nastier, deeper and more protracted" than the 2001 recession, says Nouriel Roubini, president of Roubini Global Economics.

Writing on his blog Wednesday, Roubini repeated his call that the U.S. would be in recession in 2007, arguing that the collapse of housing would bring down the rest of the economy.

Roubini wrote after the National Association of Realtors reported Wednesday that sales of existing homes fell 4.1% in July, while inventories soared to a 13-year high and prices flattened out on a year-over-year basis.

"This is the biggest housing slump in the last four or five decades: every housing indicator is in free fall, including now housing prices," Roubini said.

The decline in investment in the housing sector will exceed the drop in investment when the Nasdaq collapsed in 2000 and 2001, he said.

And the impact of the bursting of the bubble will affect every household in America, not just the few people who owned significant shares in technology companies during the dot-com boom, he said. Prices are falling even in the Midwest, which never experienced a bubble, "a scary signal" of how much pain the drop in household wealth could cause.

Roubini is a professor of economics at New York University and was a senior economist in the White House and the Treasury Department in the late 1990s. His firm focuses largely on global macroeconomics.

While many economists share Roubini's concerns about imbalances in the global economy and in the U.S. housing sector, he stands nearly alone in predicting a recession next year.

Fed watcher Tim Duy called Roubini the "the current archetypical Eeyore," responding to a comment Dallas Fed President Richard Fisher made last week in referring to economic pessimists as "Eeyores," after Winnie the Pooh's grumpy friend.

"By itself this slump is enough to trigger a U.S. recession: its effects on real residential investment, wealth and consumption, and employment will be more severe than the tech bust that triggered the 2001 recession," Roubini said.

Housing has accounted, directly and indirectly, for about 30% of employment growth during this expansion, including employment in retail and in manufacturing producing consumer goods, he said.

In the past year, consumers spent about $200 billion of the money they pulled out of their home equity, he estimated. Already, sales of consumer durables such as cars and furniture have weakened.

"As the housing sector slumps, the job and income and wage losses in housing will percolate throughout the economy," Roubini said.

Consumers also face high energy prices, higher interest rates, stagnant wages, negative savings and high debt levels, he noted.

"This is the tipping point for the U.S. consumer and the effects will be ugly," he said.

It's not all bad.

The upside is that when practically everybody in America defaults on their loans at once, there's no way on earth that creditors can go after everyone. It'll be cheaper to press RESTART and start from scratch.

Either that, or press the red button for self-explode.


At Friday, August 25, 2006, Blogger nes718 said...

It'll be cheaper to press RESTART and start from scratch.

Either that, or press the red button for self-explode.

If the bottom falls out from under the economy, I feel the latter will happen. A 'panic' will ensue and Bush or successors can call up their marshal law scheme and suspend the constitution. Ugly it will get!

At Friday, August 25, 2006, Blogger Brother John said...

They're going to finish robbing everybodys' wealth and assets, and their philanthopists will have plenty of volunteering "faith basers" to catch people's fall, hoping that "we all unite and get along"

At Friday, August 25, 2006, Blogger MMark said...

I look forward to the recession. We have them every few decades, and they help us grow stronger as people and as a country. Even better would be a depression, as depressions are a great platform for a draft, as almost everyone is out of work. Even the formerly rich will join the fight. Then we can bring this war to the level it deserves to be at. Global.

At Friday, August 25, 2006, Blogger NMC said...

Look, the only people who have to worry about a recession are the lower to middle class people. The rich will just pack up and head off to the Caribbean to wait it out.

And, yes, that includes the Bush cabal.

At Saturday, August 26, 2006, Blogger lesliemai said...

you sound very young mmark, only a young person would make a statement like that, but judging by the way you speak i can only guess you are in the military in one of our countries fighting the crusaders war, because there can be no way you would be preaching war from the safety of your home in amerika, that would just be spineless, no ?

At Saturday, August 26, 2006, Blogger Undeniable Liberal said...

One of the many falsehoods that REALLY burns the undeniable liberal's pale skinny ass is the flat-ass lie that the economy is strong. It's the funny math that Bush uses. The upper one or two percent of Americans are seeing gains like never before, and the rest of us are becoming more and more worse off as time goes by. But when you average everything out, EVERYBODY is doing better. Bull-fucking-shit. The cost of everything is going up, and for a large majority of us, wages have been stagnant for quite some time. People are taking out home equity loans at a record rate just to stay ahead, but the cows are coming home.
Yes in-frickin-deed, the economy is roaring, and whats totally amazing is that the Cheney menstruation actually claims loudly and proudly that as a fact, while the majority of us are feeling pain. The fact that they are bragging about the economy rather that running and hiding from it shows you what they think of idiot America.

At Saturday, August 26, 2006, Blogger superslave2 said...

that has been the plan i have felt for the last 20 years... bring in plenty of 3rd worlders , crash the economy ("bank holiday" anyone?)....when the brown folks go nuts - which they will (do you think they'll stand in line for hours for a friggin apple like my great grand father ? !) the middle class white sheep will BEG for their Jewish gov't (ZOG) to take their firearms and lock up "radicals and haters"...siberia here we come...! we'll see -

anyway, the sooner the better.... before the country becomes even more 3rd world and before the jewish gun grabbers do their thing...

as GW said, "bring it on"... : )

At Saturday, August 26, 2006, Blogger Michael Price said...

mmark is a mentally disturbed little troll.

At Saturday, August 26, 2006, Blogger Lew Scannon said...

lesliemai hit the nose on the head. mmark is a recruiter who knows a recession would be good for business!

At Saturday, August 26, 2006, Blogger Citisucks said...

One good thing at the recession is that I have enjoyed seeing a number of small dicked losers get their SUV's/Trucks reposed, not be able to afford gas to put in their gas guzzlers, or they broke down and were unable to replace them with anything because the smaller pea brains blew all their money on the SUV/Truck. They are all now having to take the bus. That is what these assholes get for supporting the corporate terrorists.

Being a good Marxist, I also hope that this will spark the revolution and just remember this corporate terrorists-that means you small dicked mmark-"those who make non-violent revolution impossible, make violent revolution inevitable".


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