21.6.11

Data reflect something more serious than a hiccup

Roubini identifies three short-term triggers of a double-dip recession for 2011. Those are:

i) "[…] the problems of the eurozone periphery are in some cases problems of actual insolvency, not illiquidity"

ii) Chronic US growth as a consequence of: "slow but persistent private and public-sector deleveraging; rising oil prices; weak job creation; another downturn in the housing market; severe fiscal problems at the state and local level; and an unsustainable deficit and debt burden at the federal level."

iii) "economic growth has been flat on average in the UK over the last couple of quarters, with front-loaded fiscal austerity coming at a time when rising inflation is preventing the Bank of England from easing monetary policy."

"[The] lack of policy bullets is reflected in most advanced economies' embrace of some form of austerity, in order to avoid a fiscal train wreck down the line. […] If the latest global economic data reflect something more serious than a hiccup, and markets and economies continue to slow, policymakers could well find themselves empty-handed. If that happens, the risk of stall speed or an outright double-dip recession would rise sharply in many advanced economies."

Source: Project Syndicate