Roubini and Soros Say The U.S. Already in A Double Dip Recession and Warn of Uprising

By EconMatters

Dr. Doom Roubini has grown even more pessimistic since he put a 60% probability of a U.S. double dip in 2012 just about three weeks ago.  Business Day reported that speaking at a press conference in Johannesburg on Sep. 20, Roubini now says, "The US is already in a recession although it will not admit it." and that the rest of the world would not be insulated from the effects of another global meltdown. (Clip at our site)

Regarding Greece and Euro Zone, Roubini thinks Greece would do best to default on its debt and leave the euro zone, and that Europe needs to step up austerity measures: . Eerily, George Soros also said almost exactly the same in a CNBC interview (Clip at our site).  Soros believes the U.S. is already in a double dip recession, and that "a number of smaller euro zone nations could default and leave the single currency area."  

Soros also sees Europe could be "more dangerous" to the global financial system than the Lehman Brothers in 2008, due to "Euro zone policymakers repeatedly following the wrong policy shifts."

But there's a reason Boubini earned his "Dr. Doom" reputation as he made an even more ominous prediction that there would be protests as well in the world’s largest economy.

"There is growing inequality all over the world. We have already seen middle-class unrest in Israel. Germans have smashed fat cats' cars.....As we go into another recession, there will be unrest in the US."

Interestingly, Business Day quoted Roubini that he was not averse to state involvement in the economy and held up Singapore — which had state ownership of firms and joint regulation and free markets — as an economy that might be shielded from global shocks.

EconMatters Commentary

While we are a bit surprised that Roubini seems to have lost total faith in capitalism by embracing a somewhat socialistic structure of the Singapore Model, we have to admit, on first blush, we (along with the markets) are sufficiently freaked out by both Roubini and Soros asserting the double dip status of the United States.

However, that feeling quickly dissipated as we think about the definition of recession - two down quarters of GDP, or when National Bureau of Economic Research (NBER) declares one, and realized the U.S. so far has not met these conditions yet.

We do believe Europe now holds the key as there's a distinct risk that the U.S. could be pushed over the recession edge by the Euro Zone debt crisis due to the interlinkage of the global financial system. On the other hand, the current euro zone debt crisis is quite similar to the debt ceiling fiasco in the U.S. a while back.  

The bloc has an inherent structural weakness - central currency without a central political governing body.  But eventually there will be resolution, be there a Greek default and leaving the currency union, or a super-roid-charged bailout package as the stakes are too high for a Euro collapse.

Meanwhile, the U.S. economy could be facing a tough patch in the next two years or so, but the odds are still in favor that backed by its tremendous natural and human resources, the country could pull through and resume growth.        

Roubini has been consistent with his double dip recession gloom and doom for the past three years; however, Soros' track record suggests that his recession talk could be nothing more than a reflection of his current trading position, knowing his influence over the markets, rather than an objective economic assessment.

(Both videos available at our site)

Further Reading - Maps Du Jour: Food Inflation Riots and The Libyan Politics

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Comments

[Mr_Wonderful]

Given the extreme debt in the U.S. economy (350% of GDP. 750% if you include unfunded contingent entitlements) anything under 5% in effect constitutes recession.

The entitlement shortfall is  4 times larger than the economy and increasing 5% per year.  Thus for that shortfall to remain in proportion to economic growth, GDP would have to increase by 20% per year. This is the giant elephant in the room.

[Hubbs]

It's not just the elephant in the room, it's all the poop it dumps that has to be cleaned up. Start handing out brooms and shovels.

[New_Meat]

At least THAT is shovel ready!

[RSloane]

Finally!!

[AldousHuxley]

67% is military waste.

That's why even republicans can't even cut the budget. But I'd rather cut military industrial complex subsidies which benefit the few before cutting any other social spending.

http://information2share.files.wordpress.com/2011/06/death-and-taxes.jpg

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