I Love Economists

by Manshu on April 17, 2009

in Opinion

In a strange co-incidence — I spent about two and a half minutes laughing at this great Dilbert strip thinking whether Scott Adams really does read Nouriel Roubini’s stuff and then I stumbled upon this article from Roubini.

Dilbert.com

Source: Dilbert

“Mild signs that the rate of economic contraction is slowing in the United States, China and other parts of the world have led many economists to forecast that positive growth will return to the US in the second half of the year, and that a similar recovery will occur in other advanced economies.

The emerging consensus among economists is that growth next year will be close to the trend rate of 2.5 per cent.

Investors are talking of ‘green shoots’ of recovery and of positive ‘second derivatives of economic activity’ (continuing economic contraction is the first, negative, derivative, but the slower rate suggests that the bottom is near).

As a result, stock markets have started to rally in the US and around the world. Markets seem to believe that there is light at the end of the tunnel for the economy and for the battered profits of corporations and financial firms.

This consensus optimism is, I believe, not supported by the facts. Indeed, I expect that while the rate of US contraction will slow from -6 per cent in the last two quarters, US growth will still be negative (around -1.5 to -2 per cent) in the second half of the year (compared to the bullish consensus of +2 per cent).

Moreover, growth next year will be so weak (0.5 to 1 per cent, as opposed to the consensus of 2 per cent or more) and unemployment so high (above 10 per cent) that it will still feel like a recession.

In the euro zone and Japan, the outlook for 2009 and 2010 is even worse, with growth close to zero even next year. China will have a more rapid recovery later this year, but growth will reach only 5 per cent this year and 7 per cent in 2010, well below the average of 10 per cent over the last decade.”

Roubini has been right all this time and so it won’t be a surprise if he gets it right this time as well. I like to look at the bright side so even if he is right, the global economy should be alright in about an year and a half.

{ 1 comment… read it below or add one }

Ancella April 17, 2009 at 6:46 am

This made a very interesting read πŸ™‚

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