By Hootsbuddy
In case the reader has not been paying attention, Nouriel Roubini, a voice of Cassandra that accurately predicted the current recession a year ahead, cautions that what is being carelessly called a "recovery" may well be a blip in a "double dip" recession. His reasons are not arcane.
Most emerging economies may be returning to growth, but they are performing well below their potential.
Moreover, for a number of reasons, growth in the advanced economies is likely to remain anaemic and well below trend for at least a couple of years.
The first reason is likely to create a long-term drag on growth: Households need to deleverage and save more, which will constrain consumption for years.
Second, the financial system� both banks and non-bank institutions�is severely damaged. Lack of robust credit growth will hamper private consumption and investment spending.
Third, the corporate sector faces a glut of capacity, and a weak recovery of profitability is likely if growth is anaemic and deflationary pressures still persist. As a result, businesses are not likely to increase capital spending.
Fourth, the releveraging of the public sector through large fiscal deficits and debt accumulation risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth.
That's how he sees the macro picture. Getting to the double-dip scenario becomes a kind of "super-macro" analysis, Roubini's strong suit.
There are also now two reasons to fear a double-dip recession. First, the exit strategy from monetary and fiscal easing could be botched, because policymakers are damned if they do and damned if they don�t. If they take their fiscal deficits (and a potential monetization of these deficits) seriously and raise taxes, reduce spending and mop up excess liquidity, they could undermine the already weak recovery.
But if they maintain large budget deficits and continue to monetize them, at some point�after the current deflationary forces become more subdued�bond markets will revolt. At this point, inflationary expectations will increase, long-term government bond yields will rise and recovery will be crowded out.
A second reason to fear a double-dip recession concerns the fact that oil, energy and food prices may be rising faster than economic fundamentals warrant, and could be driven higher by the wall of liquidity chasing assets, as well as by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created a major income shock for the US, Europe, Japan, China, India and other oil-importing economies. The global economy, barely rising from its knees, could not withstand the contractionary shock if similar speculative forces were to drive oil rapidly towards $100 a barrel.
Like most people I had never heard of Roubini before last September when the market crashed. A few days later when he appeared on C-SPAN's Washington Journal a few grateful callers thanked him for his warning of the coming collapse of equities which led them to put their assets into CD's. The return was lousy, but when September came their caution was rewarded when the value of those CD's held as equities took a bath (from which they have yet to recover).
My first thought that terrible September day was Where would we be if George Bush's pet notion of Social Security Privatization had come about? That is a really scary thought.
Back now to our regularly scheduled programming...
Today's lesson in comparative health care systems is a look at Spain's "public option." Listen to this four and a half minute report from NPR which opens with an interview from a woman with a new kidney. Critics can feast their appetites on the comments thread, some of which read like grumpy Libertarians exiting from a Michael Moore film.
I'm tired of arguing. I'm leaving the problem of wholesale public ignorance up to the Lord. Here in Atlanta I cannot compete with twenty-four/seven media disinformation which seems to have gripped the place like a plague. And it looks as though the national picture isn't much better. I so want a high-profile voice to announce: What we need to do is dismantle government insurance and health care altogether, starting with Medicare, followed by outsourcing the Veterans Admistration and the Military Services to the private sector.
Here's an idea. How about an all-volunteer Civilian NHS along the lines of the all-volunteer military? Medical professionals opting to enlist would know in advance what their expected earnings would be according to seniority, specialty and performance. Rates would be published like menu prices in a restaurant. The system would need no tax money since revenue would pay costs. Citizens and insurance companies could take it or leave it according to their means or political inclinations. Such a system would be the go-to resource for Medicaid beneficiaries unless a more competitive private provider was available. Now that's what I would call real tax savings, especially when the Medicaid people come calling, recovering tax money otherwise being spent wastefully.
Oh, crap. There I go dreaming about another public option again. I keep forgetting. This is about money, not medicine. 'Scuse me.
Followup Dr. Roubini was interviewed on NPR. Six minutes.
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