Nouriel Roubine & Ian Bremmer: The meltdown suffered by the US and its partners are irreversible

[Better Believe It]

Paradise Lost: Why Fallen Markets Will Never Be the Same
By Ian Bremmer & Nouriel Roubini
Ian Bremmer is the president of political risk research and consulting firm Eurasia Group and the author of The End of the Free Market: Who Wins the War Between States and Corporations? Nouriel Roubini is a professor of economics at New York University’s Leonard N. Stern School of Business, chairman of Roubini Global Economics and co-author of Crisis Economics: A Crash Course in the Future of Finance.
September 2010

Crises breed denial. Whether a crisis concerns an individual’s health, career or marriage, a company’s reputation or market share, or a nation’s place in the global pecking order, powerful incentives exist within the stricken entity to aspire to a return to normalcy — and to proceed as if that result represents the only option. However, as we all know from human experience, some setbacks are irreversible. We believe the recent meltdown suffered by the U.S. and its partners on the liberal side of the global economy is one of them.

Still, many policymakers and economic thinkers in the U.S., Europe and Japan remain shrouded in denial. They assume that after a period of healing, high growth will return and the rules of global capitalism will restore the preeminence of the U.S. economy and the appeal of a chastened (yet only slightly less freewheeling) laissez-faire Anglo-Saxon model.

Such thinking is either dangerously naive or the result of epistemological blindness. A scenario can be charted in which the U.S. and its liberal market adherents not only return to precrisis “potential growth” but even exceed it. But the political, economic, financial and psychological hurdles standing in the way of this scenario suggest it would require divine intervention to make it so. An extended period of anemic, subpar growth is the much more likely scenario as there is a painful deleveraging by households, financial sectors and governments. One cannot even rule out the risk of a double-dip recession in the U.S. and other advanced economies.

Under such conditions, central bankers (at least in the U.S. and Europe) once again represent the last bastion against a double-dip recession. While not our main scenario, the risks of a double dip have been rising for months. The inflation- and deficit-focused European Central Bank may well be dooming the euro zone to a second round of economic decline by maintaining a too-tight monetary policy and backing German calls for fiscal austerity at all costs — again, a political reflex, born of German voters’ anger at having to bail out their imprudent Mediterranean cousins. In the U.S. the Federal Reserve Board, having (barely) survived postcrisis efforts to bring monetary policymaking under legislative purview, has started talking again about reentering the market for either mortgage securities or U.S. government bonds. With interest rates near zero, this new round of quantitative easing would signal a desperate moment — a groping of the bottom of the tool kit, with all the peril that public disclosure of such a decision would bring with it.

Read the full article at:

http://www.institutionalinvestor.com/banking_capital_markets/Articles/2660510/Paradise-Lost-Why-Fallen-Markets-Will-Never-Be-the-Same.html?p=1

[theophilus]

1. Well, NOTHING lasts forever. "Irreversible" is a strong word, too. n/t

[Better Believe It]

2. They probably mean in the next decade or two.

And it's hard to imagine the United States leading the world economy in the 21st Century.

[Better Believe It]

6. Kick

[xchrom]

3. Wow - that's a very interesting read. Nt

[lib2DaBone]

4. How did we get to the point.....

Where a tiny group of politically connected overlords, "rent" our own money back to us?

This small group of overlords control the flow of our money.. and they make sure they profit from every endeavor that is necessary to carry on life in the United States.

They gorge themselves at the trough of leisure.. while they work the American people like a rented mule. Cut health care, cut social security, cut the G.I. Bill... cut America to the bone while lavishing free money on the people who control the system.

Eventually.. the rented mules are going to get pissed.. and sit down on the job.

[dkf]

12. The "mules" are workers in other countries and illegal immigrants.

Those who work cheapest will get the jobs.

[snagglepuss]

5. K & R nt

[blueworld]

7. Well, I'll have to ponder the arguments for a little while

but I have a real problem with anyone whose first assertion is basically "if you disagree with my position, you're in denial"; naive or blind. And I agree with a previous poster in that growth is change. Nothing lasts forever.

Perhaps it's the emphatic tone that's causing me the problem. I'll read & re-read, but thanks for posting it.

[Ron Green]

8. The US can still kick ass with its military

or we can lead the world by setting an example of how to convert corporate death systems into locally managed, life-affirming systems.

[Better Believe It]

9. Like in Afghanistan? You're joking. Right? I hope so! :)

[Ron Green]

10. Wait till the end-timers and PNACers get their way.

Unlimited war is just what some of these bozos want, and then those pesky "Rules of engagement" won't mean much.

[Lydia Leftcoast]

11. In reading The Shock Doctrine, I'm seeing parallels with our current situation

Really scary parallels.

[Supersedeas]

13. Think of it as a high stakes standoff--between Wealthy one percenters and the rest of America

in which the choices are fundamentally established two different forms of suffering:

Either the Rich are forced to pay a greater share in order to achieve a level of stability risking the potential that rich investors pack their bags and leave for countries where the tax burden is reduced to almost nothing; OR

The Middle class are forced to pay a greater tax burden in order to ensure that wealth investors stay here.

The Right Wing has alway and will forever chose the latter option. The question is how far our political leader are willing to go along the path of the first option before caving.