The U.S. Economy Increasingly Looks Vulnerable To Falling Back Into Recession

Roughly three years since the onset of the financial crisis, the U.S. economy increasingly looks vulnerable to falling back into recession. The United States is flirting with stall speed, an anemic rate of growth that, if it persists, can lead to collapses in spending, consumer confidence, credit, and other crucial engines of growth.

Call it a "double dip" or the Great Recession, Round II: Whatever the term, we're talking about a negative feedback loop that would be devilishly hard to break.

Nouriel Roubini and Michael Moran, in Foreign Policy

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US Zeitgeist 2010

The Euro At 1.4000 Is A Painful Level For The Euro Region

"Nouriel Roubini, the professor credited with predicting the 2008 economic crisis, expects the European Central Bank to be forced to ease monetary policy further and sees risks of a double dip recession.

Roubini, speaking at the Peterson Institute today in Washington, said that the euro at 1.4000 is a “painful” level for the euro region."

in Bloomberg.com

Home Prices Will Fall Another 10%

Dr. Doom, New York University professor Nouriel Roubini, told an American Enterprise Institute forum Wednesday that even though the recession technically ended in June 2009, he believes home prices will fall another 10% and that there is now a 40% chance that the economy will fall back into recession over the next 12 months.

in www.huffingtonpost.com

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There Is A 40% Probability Of A Double-Dip Recession

There is a 40% probability of a double-dip recession, but you don't need one for the global economy to feel like it is in a deep, continuing recession, said Nouriel Roubini, the famous pessimist and economics professor at New York University on Wednesday. He said external shocks, such as another Greek credit crisis, perhaps with problems in Spain, Portugal or Ireland, could trigger the shock needed for a double-dip recession. "You don't need another Lehman story, you don't need a major loss," said Roubini at an American Enterprise Institute event. "You can have death by a thousand cuts."

in CBS MarketWatch

Capital Will Keep Flowing Into Emerging Markets

The global financial crisis sped up the pace of capital inflows into emerging markets, economist Nouriel Roubini said Tuesday.

Speaking at a conference here, he said that if and when advanced economies recover from the global financial crisis, the emerging markets will still see a greater share of capital inflows over the long-term, as participants diversify their investment portfolios, lured by the robust growth forecast for emerging markets.

Many emerging markets, including countries in Latin America such as Chile, have seen their currencies bulge versus the dollar, in part on strong capital inflows.

in WSJ

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China `s Questionable Infrastructure Investments

"You know, I go to China six or seven times a year, and you have brand-new airports three-quarters empty. Highways to nowhere all over the country."

in WSJ

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The Too Big To Fail Problem

“The ‘too big to fail’ problem has become an even too bigger to fail problem. That is what happens when you do mergers that don’t make any sense.”

Nouriel Roubini, Bloomberg Dealmakers Summit in New York

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China Will Feel The Effects Of A Slowdown In Europe, US

China, the world’s fastest-growing major economy, may face greater headwinds should there be weak growth in the United States and Europe.

in The Star, Malaysia

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If The Economic Data Surprise On The Down Side, We Are Going To Have A Correction Of The Stock Markets

"We are already in a situation which is going to feel like a recession, even if we are not in one. And if the economic data surprise on the down side, we are going to have a correction of the stock markets, widening of credit spreads, increased volatility, increase risk aversion, then it leads to a shock for the real economy."

in CNBC, September 27

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CNBC Video Interview: Global Economy Will Suffer More Financial Crises in Next 10 Years

The Main Scenario Is An Anemic Recovery, But I Don’t Rule Out That A Double-Dip Will Occur

We know the second half of the year is going to be worse than the first half of the year because of the tailwinds to growth from the fiscal stimulus turning into austerity. The main scenario is an anemic recovery, but I don’t rule out that a double-dip will occur in the US.

in Bloomberg.com

Oil Rise Is Benefiting The Mexican Peso

“Oil is rising, and that’s something that benefits the peso. The Fed’s move yesterday is weakening the dollar, and that is obviously being reflected in the peso.”

Bertrand Delgado, economist at Roubini Global Economics LLC, New York

in Bloomberg.com

The US Should Reduce The Payroll Tax For 2 Years

“A much better option is for the administration to reduce the payroll tax for two years. The reduced labor costs would lead employers to hire more; for employees, the increased take-home pay would boost much-needed economic consumption and advance the still-crucial process of deleveraging households (paying down credit card debt and other legacies of the easy-credit years).

Most policy approaches, including the Obama proposals, have tended to subsidize the demand for capital rather than the demand for labor. That has the problem backward. In the second quarter, capital spending reached an annual growth rate of 25 percent. The argument that increased demand for capital leads to greater demand for labor (i.e., if you buy more machines you need workers to run them) has not held up. Firms are investing in capital goods, equipment and offshore offices that allow them to produce the same amount of goods with less — and lower labor costs.

To avoid a chronic increase in the unemployment rate, we need to subsidize the demand for labor — achieving job creation — rather than making it cheaper to buy capital, as investment and other tax credits would do.

President Obama could fully fund the reduction in payroll tax by allowing the Bush tax cuts for people making more than 250,000 USD a year to expire. Meanwhile, the Bush-era cuts affecting middle- and low-income earners — the vast majority of Americans — would remain in place for the time being.

After two years, when U.S. growth is more robust and the pace of private-sector hiring has picked up, we can afford to phase out the payroll tax cut while maintaining the income tax rates for the rich.”

in The Washington Post

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The Fundamental Trends Might Lead To An Appreciation Of The Yen

“The size of intervention matters as well as coordination. In this case, the Bank of Japan went alone. Usually uncoordinated intervention is less effective than coordination.

The fundamental trends might lead to an appreciation of the yen further."

in Bloomberg.com

The Federal Reserve Will Move Into QE Too Little And Too Late

The Fed is not going to move next week. They’re going to move maybe in November because the latest data have been slightly better than expected. Eventually they’re going to get to QE but it’s going to be probably too little and too late.

in Bloomberg

CNBC Video Interview

Latest Nouriel Roubini video interview.

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