Ace economist David Rosenberg says the sovereign debt crisis is going to be with us for some time, with negative implications for the global economy.
The trouble started in Greece and has spread to Portugal, Spain and Ireland.
“This is a reminder that every country has its limit,” Rosenberg, chief economist at Gluskin Sheff & Associates, told The New York Times.
“And our heightened concerns over sovereign credit quality are not going to abate anytime soon.”
To be sure, the euro’s troubles will benefit the dollar.
“In the land of the blind, the one-eyed man is king,” Rosenberg said.
“The U.S. dollar is that one-eyed man.”
But that doesn’t mean the U.S. economy is out of the woods.
“Watching the situation in Europe, it’s not even clear that the root cause of problems here at home has been solved,” Rosenberg said.
“We still have a very fragile situation: household balance sheets, and delinquencies, defaults and home prices are still vulnerable to another down leg. People think because you finish one chapter in this post-bubble credit collapse that the book is done.”
But that’s not the case, he says.
“Unfortunately, I think we are still in the early stages.”
As for sovereign debt, Carnegie Endowment researchers Uri Dadush and Bennett Stancil say Europe doesn’t represent the biggest concern.
“Among the major economies, Japan offers the greatest source for worry in the medium term,” they wrote in a report.
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