David Rosenberg, chief economist for Gluskin Sheff + Associates, takes issue with the consensus view that a sustained economic recovery has begun.
“We are in a post-credit bubble credit collapse that is ongoing,” he writes on Ritholtz.com.
And that doesn’t bode well for financial markets, though the recent rally might continue for a while, Rosenberg says.
“Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.”
Economists err in calling this downturn “The Great Recession,” Rosenberg writes.
“This is truly a gentle way of saying ‘Depression.’”
So first we must acknowledge that we indeed experienced a depression.
“Then . . . we can draw a conclusion that a sustainable recovery will not get under way until the ratio of household credit to personal disposable income reverts to the mean — and goes to an excess in the opposite direction,” Rosenberg says.
“I know it sounds harsh, but we shall endure — believe it. Transition is rarely without pain.”
Reverting back to the mean will take several years and will require households to erase more than $7 trillion in credit, he says.
Nariman Behravesh, chief economist at forecasting firm Global Insight, also is worried about the economy.
“The recovery will be slow, and things will be fairly fragile (next year),” he told Yahoo Tech Ticker.
A double-dip recession is possible, Behravesh says.
“Any number of risks could knock us back down into recession."
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