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

Double Dippin' - Merle Hazard

Double Dip? Seven Reasons Why Not

Milton Ezrati offers seven reasons why the Double-Dip scenario is unlikely.

1. The Consumer Seems Firm Enough
2. Housing Data Are Misleading on Two Sides
3. Business Spending and Exports Are Awfully Strong for a Dip
4. Overall Production Levels Look Fairly Good, Too
5. Employment Does Not Look Threatening, Either
6. Financial Markets Are Healthier Than the Headlines Imply
7. China Continues to Grow

Nouriel Roubini recommended: "Fasten your seat belts for the very bumpy ride"

"as the optimists' delusional hopes for a rapid V-shaped recovery evaporate, the advanced world will be at best in a long U-shaped recovery, which in some cases – the eurozone and Japan – may be long enough to stretch into an L-shaped near-depression. Avoiding double dip recession will be difficult."

"[R]ecovery in emerging markets - the great hope for the global economy - will suffer, because no country is an island economically. Indeed, growth in many emerging-markets - starting with China - is highly dependent on retrenching advanced economies."

5% or 4% or ??

"Whether the world economy grows now at 4% or 5% matters, but it does not much affect our medium-term prospects. The US financial sector received an unconditional bailout – and is not now facing any kind of meaningful re-regulation. We are setting ourselves up, without question, for another boom based on excessive and reckless risk-taking at the heart of the world’s financial system. This can end only one way: badly."

Creating the Next Crisis by Simon Johnson

How to Avoid a Double-Dip Global Recession

So what should policymakers do? by Nouriel