[LINK] US Economy in Depression, Not Recession: Rosenberg

Kim Holburn kim at holburn.net
Thu Aug 26 10:29:25 AEST 2010


> Economy Caught in Depression, Not Recession: Rosenberg
> CNBC.com | August 24, 2010 | 11:23 AM EDT
> Positive gross domestic product readings and other mildly hopeful  
> signs are masking an ugly truth: The US economy is in a 1930s-style  
> Depression, Gluskin Sheff economist David Rosenberg said Tuesday.
> Writing in his daily briefing to investors, Rosenberg said the Great  
> Depression also had its high points, with a series of positive GDP  
> reports and sharp stock market gains.
> But then as now, those signs of recovery were unsustainable and only  
> provided a false sense of stability, said Rosenberg.
> Rosenberg calls current economic conditions "a depression, and not  
> just some garden-variety recession," and notes that any good news  
> both during the initial 1929-33 recession and the one that began in  
> 2008 triggered "euphoric response."
> "Such is human nature and nobody can be blamed for trying to be  
> optimistic; however, in the money management business, we have a  
> fiduciary responsibility to be as realistic as possible about the  
> outlook for the economy and the market at all times," he said.
> The 1929-33 recession saw six quarterly bounces in GDP with an  
> average gain of 8 percent, sending the stock market to a 50 percent  
> rally in early 1930 as investors thought the worst had passed.
> "False premise," Rosenberg said. "And guess what? We may well be  
> reliving history here. If you're keeping score, we have recorded  
> four quarterly advances in real GDP, and the average is only 3%."
> Rosenberg's warning comes as a slew of major analysts—Goldman Sachs  
> and JPMorgan among them—have slashed GDP projections for 2010 to the  
> 1.5 to 2 percent range.
> Chicago Federal Reserve President Charles Evans said in a speech  
> Tuesday that the risk of a double-dip recession has escalated. He  
> said government programs to help distressed homeowners have been  
> ineffective and aren't helping the pivotal housing sector recover.
> The dour outlooks come on the same day that the National Association  
> of Realtors said home sales reached a 15-year low in June, dousing  
> hopes that the industry had reached a bottoming point.
> Rosenberg points out that the "overall economic malaise" has come  
> despite aggressive efforts by the Federal Reserve to stimulate the  
> economy through rate cuts. The central bank itself has scaled back  
> its economic projections, has held steady on its balance sheet, and  
> could be announcing another round of quantitative easing measures at  
> its Jackson Hole summit this week.
> "How's that for a reality check," Rosenberg said. "It's not too  
> late, by the way, to shift course if you have stayed long this  
> market."

Commentary here:

Kim Holburn
IT Network & Security Consultant
T: +61 2 61402408  M: +61 404072753
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