Posted on 09/14/2009 6:16:07 AM PDT by Lazamataz
The US economy faces a difficult time ahead as consumers stop spending and the fallout escalates from the collapse of the commercial real estate market, economist Nouriel Roubini told CNBC.
Repeating his prediction that the economy faces a threat of a "double-dip" recession and at best a slow-growth U-shaped recovery, Roubini said in a live interview that more banks will fail and residential real estate prices have more room to decline.
Additionally, non-government bonds will face pressure, the securitization market is all but dead, the credit markets are still frozen and consumers will continue to save more rather than spend and boost growth.
"It's going to be death by a thousand cuts," said Roubini, chairman of RGE Monitor and economics professor at New York University's Stern School of Business. "The financial system is severely damaged, and it's not just the banks."
Roubini predicted more than 1,000 financial institutions could fail before all is said and done.
At the same time, he said housing prices are likely to fall another 12 percent in the next year—40 percent overall since the market began its steep decline—and about half of all homeowners will owe more on their mortgages than their houses are worth.
"The gap between supply and demand is so huge we could stop producing new homes for a year to get rid of all the inventory," he said. "This price adjustment, in my opinion, is going to continue for another year."
In addition to assessing the current problems, Roubini reflected on the year since Lehman Brothers collapsed and its effects on the financial markets. Roubini was among the most prescient economists in predicting the failure of the financial system, though he has said that aggressive intervention has prevented the worst-case scenario from happening.
Many in his field have blamed regulators for allowing Lehman to collapse, but Roubini said the system would have failed regardless of what happened to the Wall Street titan.
"We already were in the middle of a very severe crisis. Saying that bailout out Lehman, everything would have been OK, is nonsense," he said. "Lehman was a symptom of the crisis, not the cause of the crisis."
He warned, though, that regulators are repeating some of the same mistakes made during the financial crisis, this time with the commercial real estate market. Allowing forbearance in the deeply troubled sector will mask underlying problems that will come back and bite the economy, he said.
Still, he said Federal Reserve Chairman Ben Bernanke, whom Roubini had criticized harshly when the financial crisis began, took strong measures to avoid a complete collapse of the system.
"I criticized Bernanke for many of the mistakes he made before the crisis," Roubini said. "But I give him credit for his actions that led to the avoidance of another Great Depression."
What happened to all the green shoots?
Funny, nothing mentioned about the total lack of ability, talent, and IQ amongst our “leaders” in DC.
” ‘Death by a Thousand Cuts’ “
Companies are cutting workforce, consumers are cutting spending - but the Gummint grimly refuses to consider cutting *anything*...
We can survive the first two, but our ‘death’ will come from the un-cuts of the third.....
The True Cause......
.....and another symptom of the disease....people flee( like cancer victims to quacks ) to bamboozlers...
A double-dip recession implies some sort of an initial pseudo-recovery.
Except for the fraud in the stock market producing a recovery in the indices, where’s the overall recovery? Unemployment continues to rise, spending continues to fall.
President "Round-Up" Obama
I’m just glad Obama brought us back from the brink. Man, we are lucky we elected him! Just imagine what a catastrophe it would have been if he hadn’t managed to save all those jobs. Unemployment would be at 20% if if wasn’t for Obama. Just imagine if we didn’t have Obama to steer us away from free market capitalism! /s
Something I don't understand: Here in MA, people are leaving the state (well, I do understand that), so our population is dropping, meanwhile, there are lots of houses on th market, with drastically reduced prices, but they aren't selling. So here's what I don't understand: There's a tremendous amount of home construction going on.
Makes no sense to me. Where's the demand???
where are all the jobs....with all the other problems why is congress trying to ram a job defeating healthcare program down our throats.
Gee...I heard Obama take credit for saving the economy...for bringing it back from the brink.
>>>> 1,000 financial institutions could fail.... housing prices are likely to fall another 12 percent in the next year... commercial real estate market.... Allowing forbearance ... will mask underlying problems <<<<
Can’t say I disagree with any of that.
The junk (mostly from real estate speculation) needs to be wrung out of the financial system to the greatest degree possible.
Letting commericial real estate speculators off the hook will leave us in the same position as Japan, with 20 years of stagnation because we can’t or won’t face reality.
(BTW, nothing against speculators, but when you lose, you lose.)
The Great Downturn of 2010 will be *ahem* tied directly to George W. Bush, and will result in big electoral gains for Democrats in the mid-term elections.
Whatever that means, I see that it's from the CNBC original. Guess the copy desk hasn't gotten to work yet.
Well....of COURSE Obama will accept no blame for any of what he is allowing...BUT....the American people are waking up and I think the Dems will lose BIG-time!
It was an improvement from this, the original copy: "We already were in the middle of a very severe crisis. Smash cop grab dog drug import ticket car, coup frank barrel, is nonsense," he said. "Whacked environment bank cloud street mix busted are parolees."
But if we wake up that Weds and find that the Dems have actually picked up seats in both houses, well ... I'll see you on Lexington Green.
Massachusetts population has been under pressure for decades. Basically, the state is becoming elderly. Young families flee. The largest influx has been poor, uneducated, welfare consuming illegals. See Holyoak, Lowell, Lawrence, Springfield.
Shelter of all types does decay. It is often cheaper to build new, then remodel. Further older decaying structures are usually in poor, undesired towns and cities.
Another thing that is going on is due to the nature of getting a paycheck as a builder. No buildee da houses, no paycheck. Lots of builders get a bank note to build a house, because they need the money NOW, not when the house is sold. Heck, let the bank have it back. These builders are on fumes and desperate. They are like farmers who have gone on two years of drought crop losses but somehow get credit for seed for one more last planting.
I work in a working class saloon. I’d say about half of non welfare/working class/tradesmen types are either out of work, living off unemployment or working part time.
This is going to be a desastrious Christmas for retailers and hard all around. A lot of people’s nearly year long unemployment is going to be exhausted this winter.
So, housing price averages continue down. More upside down mortgages, more foreclosures, more unemployment( at a slower rate ), more people totally off unemployment insurance. Credit cards shut off for most people, people not using it anyways. Car sales post heroin addiction finance party C4C grinding to a stop. Taxes, fines, fees, permits, all going up. Dollar going down, commodity metals going up, Obama blathering, RINO limp wrist boil suckers ‘leading’ (HA!) the Great Elderly Party, Socialist/Commies pouring it on, smelling blood.
Yeah. It’s all good.
A LOT of people are praying and working for this. ;-)
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