On June 25,2012, David Rosenberg, Chief Economist at Gluskin Sheff & Associates discusses on the Daily Ticker the potential of a “double-dip” recession due to growth forecasts cuts at the Federal Reserve for the second half of 2012 and 2013.
Rosenberg said:
“We are living in a modern-day depression.”
“Government transfers to the personal sector now makes up nearly one-fifth of total household income. Even Lyndon Johnson, architect of the ‘Great Society’, would blush at that.”
In the accompanying video Rosenberg also cites:
Wealth Destruction: The Fed’s recent report on the massive 40% drop in median household wealth from 2007-2010. (See: The American Dream Shrinks: Avg. Net Worth Falls 40% From 2007-2010)
The Housing Bust: Despite recent signs of stabilization, the national housing market remains depressed, with nearly 30% of mortgage holders under water. This is particularly troubling for Baby Boomers, who had viewed their homes as a major source of potential income for retirement but now wear them as a “ball and chain,” Rosenberg quips.
Unemployment: As with housing, Rosenberg dismisses the job market’s improvement in recent years. He cites the “real” unemployment rate — currently 14.8% — and the fact the country is still down 5 million jobs from its 2007 peak.
While the economy has been growing for three years, the recovery is the worst in the post-war ear, he says. Growth is “pathetic” given the “gargantuan” support the federal government and Federal Reserve have provided, he declares, noting this is not a U.S.-only phenomenon.
“Three years into the aftermath of the worst recession since the 1930s, the global economy still cannot manage to expand organically — that is, without the need for ongoing life support from central banks and governments.”
While many shudder to think what the economy would look like without that support, Rosenberg says policymakers’ attempting to “put a floor” under the economy only serve to “prolong the agony.”
Judging by historical research on past debt deleveraging cycles, this ‘modern-day depression’ is only halfway done, Rosenberg says, and that’s his glass half-FULL outlook.
