The Cycle of Economic Deflation During 2009

[Crewleader]

Economics / Deflation Jan 11, 2009 - 02:44 PM

By: Prieur_du_Plessis

Bloomberg: Nouriel Roubini - worst is still ahead of US
“The global financial system in 2008 experienced its worst crisis since the Great Depression of the 1930s. Major financial institutions went bust. Others were bought up on the cheap or survived only after major bailouts. Global stock markets fell by more than 50% from their 2007 peaks. Interest-rate spreads spiked. A severe liquidity and credit crunch appeared. Many emerging-market economies on the verge of a crisis had to ask for help from the International Monetary Fund.

“So what lies ahead in 2009? Is the worst behind us or ahead of us?

“Unfortunately, the worst is ahead of us. The entire global economy will contract in a severe and protracted U-shaped global recession that started a year ago. The US will certainly experience its worst recession in decades, a deep and protracted contraction lasting at least through the end of 2009. Even in 2010 the economic recovery may be so weak - 1% growth or so - that it will feel terrible even if the recession is technically over.

http://www.marketoracle.co.uk/Article8179.html

[David Dunham]

1. Roubini is too pessimistic.

[Mojorabbit]

2. I think he is too optimistic. nt

[Warpy]

3. That is if Obama is allowed to do what needs to be done

in terms of restoring a rational tax system while protecting US jobs and shoring up wages.

If he isn't, expect that L-shaped depression as the consumer class evaporates completely into serfdom, able only to buy subsistence items and providing no demand to spur anything else.

In the best case, things won't improve until the last of the bad mortgage paper churns through the system at the end of the summer, 2010. Even after that, the housing slump will continue to feed on itself as continued oversupply keeps pushing prices downward.

Unless people are making sufficient wages at jobs they can rely on to be there for more than a month or two, the best mortgage terms in the world won't draw them into the market.