[lbo-talk] Roubini: Worst Financial Crisis Since the Great Depression and W

Cseniornyc at aol.com Cseniornyc at aol.com
Tue Jul 29 00:19:48 PDT 2008


Doug Henwood says:"The leading indicators are negative, but mildly so. Even Roubini doesn't expect armageddon - I personally heard him say this to the Council on Foreign Relations. Like I say, it could get worse, but given all the blows the U.S. economy has taken, you'd think that GDP was running at -2%, and not around 0%. " ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^^^^ Well ,I listed about 15 different economic facts and indexes and Mr Henwood reduces them to one set: the "leading economic indicators". Very clever. I simply was pointing out that evidence and facts are mounting up almost daily pointing out to a recessionary trend. By the way,I didn't mention the word "Armageddon" or Apocalypse or black hole depression, etc.This link between recession and Terminator day is gratuitous and unfair. Actually, disaster might be preferable because big crises usually lead to quick reactions and rapid drastic solutions.It is very likely that because the economy has grown to enormous proportions in all sectors and it is now globalized , a 1929 type of big depression ha low probability. But the alternative: a slow-mo ,creeping, stop-go recessionary economy might be even worse if prolonged, as in a L type of outcome. The agony of steady unemployment, real wage losses and upward price pressure might push the working classes toward populist right wing solutions In any event my point is independent of Roubini's view. One shouldn't rely too much of percentages or ratios but on the flow of evidentiary facts. for instance: last week Ford Motor announced $ 9 Bn in losses. Wall St says that bonuses for 2008 will be $ 28 bn lower than for 2007. It was revealed today that the Federal deficit for $ 2009 will be half a Tn and higher if you include the cost of the war. Sales of US homes are at a 10 year low. The IMF sees no end to the financial crisis. Merrill Lynch reveals a further $ 6 bn write off for this week. The dollar continue its free fall,etc Still the major crucial point is that for the last decade debt and financialization of just every thing was the engine propelling the system and it won't be there anymore .So any one who believes the economy will keep going should be clear as to what the new engine will be about. Consumption as the chief component of the GDP won't there because the mortgage refi binge for home owners is fimito Interestingly ,economists Paul Krugman and Ken Rogoff coincided last week in writing that " the question is whether we are in for a bad couple of years or for a bad decade". Maybe we should write them that they are wrong because the fall in the leading indexes is just mild. By the way, Rockefeller's CFR is the perfect setting for that Italian right winger,Nouriel.

Cris Senior

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