The Housing Chronicles Blog: "Dr. Doom" Roubini sees some light at the end of the tunnel

Friday, April 3, 2009

"Dr. Doom" Roubini sees some light at the end of the tunnel

Dr. Nouriel Roubini, long a housing bear, actually may be seeing some glimmer of hope for the economy and a rebound. From his column at

As I have argued before, the risk of an L-shaped near-depression will be significantly reduced if aggressive policy actions were undertaken. That risk of near-depression is now lower than it was three months ago--but not gone altogether--as policy makers in the U.S. and globally have finally gotten religion and taken out all their policy bazookas, missiles, rockets and artillery and started to use them...

These policies will not restore positive growth in advanced economies until next year, but will reduce the rate of economic contraction to a more moderate pace by the end of 2009. Thus, as I noted earlier, the rate of the advanced economies' economic contraction will slow down from the peak contraction of this year's first quarter (-6%) to a more modest contraction in the fourth quarter (-2%) and a very weak positive growth (0% to 1% in U.S., Europe and Japan) in 2010 with still sharply rising unemployment rates peaking at 10% in these advanced economies...

So the road ahead is still very, very bumpy. The worst for the degree of economic contraction may be behind us by the second or third quarter of this year, but there will not be any robust and sustained recovery as the damage of the financial and real excesses of the last few years will have lasting effects on actual and potential growth for the U.S. and global economies. And the burden of trillions of dollars of additional fiscal deficits and debts in advanced and emerging economies will be a drag on actual and potential growth for years to come.

But if aggressive policy actions are accelerated after the G-20 meeting in London, one can expect a slow and painful process of mending the U.S. and global economy that will still take a long time. That will, however, allow us to see the light at the end of the tunnel some time next year, first for the real economies, next for financial markets and finally for the financial system and its wounded institutions.

Does that mean he's ready to pop open the champagne?

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