Newsmax Finance Insider David Stockman, White House budget director under President Reagan, warns that a recession will “engulf the entire world economy including the United States.”
"Everywhere trade is drying up, shipping rates are at all-time lows," he told CNBC.
He said the recent stock market rebound is nothing more than a “dead-cat bounce and they've already buried the cat!”
“Look at the data coming in year-to-date, and this is why I think the stock market is going down too. Every bellwether economy — exports in Japan down 13 percent last night in January, China down 10 1/2 percent, India down 13 1/2 percent, Korea down 8 1/2 percent. Everywhere trade is drying up. Shipping rate are at all-time lows. Singapore is essentially crashing,” he said.
“The oil price is heading into the teens because the world economy is falling apart,” he said.
“We're done with the 20-year credit bubble. The central banks everywhere are lost. Out of dry powder,” he said about monetary policymakers.
"They should have the good graces to resign. They are lost. None of this is helping the economy," he said.
And the 2016 presidential election really won’t help the situation.
"The out-of-control election process will feed into and create an environment that we haven't seen since the fall of 2008," he said.
As economists size up the chances of the first nationwide slump since 2009, pockets of the country are already contracting. Four states — Alaska, North Dakota, West Virginia and Wyoming — are in a recession, and three others are at risk of prolonged declines, according to indexes of state economic performance tracked by Moody’s Analytics.
The regions suffering the most are in the flop stage of the energy industry’s boom-to-bust cycle, and manufacturing-dependent areas hurt by a rising dollar are at risk of receding. Whether the weak links break the entire U.S. economy will hinge largely on a group that’s benefited from the energy price collapse: American consumers.
“The impetus for weakening regional economies is the huge fall in energy prices and other commodities prices, which is taking a tremendous toll,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who is concerned of a broadening into a national recession, told Bloomberg. “If the consumer were to falter for any reason, that would be a big problem.”
(Newsmax wire services contributed to this report).
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