Gary Shilling, economist and head of A. Gary Shilling Co., says that full economic recovery will take at least 10 years — and that’s the good news.
“Although investor views of the economy have reversed in the last five months, the reality probably hasn't,” Shilling writes in a note to investors. The necessary “financial deleveraging will probably take a decade or more.”
"The ground to cover is so great that if it were traversed in a year or two, major economies would experience Depressions worse than in the 1930s."
Deleveragings of the global financial sector and U.S. consumer arena are substantial and ongoing, Shilling explains, with severe drops in household debt.
Shilling notes that seemingly isolated events such as Europe’s financial woes, a crisis in commercial real estate, or a nosedive in the Chinese economy are all possible, as are other shocks here or abroad that we don't foresee.
“Keep your eyes pealed,” Shilling cautions, “because it won't take much disruption to push the fragile global economy back into decline.”
Tightened consumer wallets are creating serious problems for U.S. small businesses, says Bill Dunkelberg, chief economist for the National Federation of Independent Business.
“We know the difficulties they [consumers] had: They came into the recession with the largest debt load relative to income that we’ve seen in a while,” Dunkelberg told CNBC.
“If they’re not spending, then small businesses have no reason to spend any money or hire, and that’s the issue.”
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