Tuesday, 28 July 2009

Not bad for an armchair economist

Hah! My cynical self doubted that this recession is done, due to, consumer debt government debt. Debt, debt, debt.

I like it when big noses agree with me.

Huge amounts of money have been poured into the system, so the people getting all that money will feel good for a while, [global money manager Jim Rogers of Singapore-based Rogers Holdings] observes. But in the end, he says, someone has to come up with all the money which people are now receiving. It must come from taxes, borrowing or printing, none of which will be good down the road. We will feel the effects and things are likely to get worse, he says, spurred by a resumption of the recession.

Why another economic hurricane? Because of gigantic debt, currency problems, taxes and inflation, Rogers says. In other words, the financial markets face new problems that will affect the market.

....

[New York University's economics professor Nouriel] Roubini, who had been saying he expects the recession to wind up by year end, now suggests any recovery will be temporary in nature.

Why so? Because this economic grizzly, who's been making the editorial rounds, is now proclaiming that we could tumble back into a recession in late 2010 or early 2011 because of shoddy or little job growth, ballooning government debt and rising oil prices. Roubini reckons we'll see puny economic growth of about 1% a year over next few years and he looks for the jobless rate (now at 9.5%) to peak at around 11%, leading to another 13% to 18% decline in home prices.

....

Ominously, he [British economist J.C. Spender] expects considerably more pressure on the middle class. The kind of economy sustained from 1950 to 2006, primarily driven by middle class consumption (such as clothes, travel, bigger cars, housing and massive spending on electronics) is basically history.

"We're never going to see the old days again," Spender says. "We'll have find new days. We're looking at a new world, which may well be a frugal world with a higher savings rate."

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