doctor doom’s 2009

Nouriel Roubini has now a weekly column on Forbes, where some synthesis is made of the much richer rge material (unique, very deep and informative news “clusters”; regular blogs or interventions by some of the best macroeconomists). This is an invitation to read regularly, as an amateur, both “Doctor Doom” Forbes column, and the free sections of (while a professional economist is obliged to subscribe to rge):

Doctor Doom

A Global Breakdown Of The Recession In 2009

Nouriel Roubini, 01.15.09, 12:01 AM EST

Forecasting pain, from the U.S. to Australia.


With the industrial world already in outright recession and the emerging world navigating toward a hard landing (growth well below potential), I expect global growth to be flat (around -0.5%) in 2009.

This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then–via a variety of channels–on the rest of the global economy.

Here is a global breakdown of my forecast.

The United States economy is only halfway through a recession that started in December 2007 and will be the longest and most severe in the post-war period. U.S. gross domestic product will continue to contract throughout all of 2009 for a cumulative output loss of 5%.

One last look at 2008 will reveal a very weak fourth quarter with GDP growth contracting about -6% in the wake of a sharp fall in personal consumption and private domestic investment.

I see the real GDP growth contraction playing out through the year as follows: first quarter 2009: -5%; second quarter 2009: -4%; third quarter 2009: -2.5%; fourth quarter 2009: -1%–adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009.

This forecast is much worse than the current consensus forecast seeing a growth recovery in the second half of 2009; I also predict significantly weak growth recovery–well below potential–in 2010. (…)

The latest cyclical upswing in the Eurozone was largely driven by a temporary but powerful boost to domestic investment from disappearing risk premia in the aftermath of the adoption of the single currency and by external demand from a buoyant world economy.

Both demand sources fizzled out by the second half of 2008, leaving the Eurozone as a whole and its largest members exposed to diverging deleveraging patterns in the face of suboptimal EMU-wide automatic fiscal stabilizer mechanisms.

The latest record-low readings of leading and sentiment indicators point to a severe recession ahead in 2009 that shapes up to be worse than the 1992-93 crisis. For the Eurozone, I expect a below-consensus contraction in real GDP of around -2.5% (…)

We believe China will experience a hard landing in 2009, with growth unlikely to exceed 5%, a sharp slowdown from the 10% average of the last five years. The reversal of capital flows and high credit cost will pull down India‘s growth significantly, to around 5% in 2009 from an estimated 6% in 2008.


This graph, now in the front page of the Greenberg geo-eco think thank of the CFR (where we always read two of our favourite blogs: Follow the money by the International Economics “Sherlock Holmes” Brad Setser (*); and the delightful political incorrectness of  Amity Shlaes’ Forgotten man: healthy antidotes to FDR or BO’s santifications), is quite informative.

RAQ (Rarely Asked Q.) Did u know, before having looked at it, that the 2nd NewEconomy bubbbbbble (2003-07)  was much more  pervasive cross-country, than the so much advertised 1st one (1994-2001)?


(*) We are much more than friends, in brotherhood from decades with Otaviano Canuto, himself an rge blogger, Catou and all their beautiful family. Nonetheless, our esteem of Otaviano as an economist made a big jump upward a few weeks ago, when we discovered, in an exchange of comments on a recent post, he had … something to teach to Brad. Before, we believed anything alike impossible, i.e. beyond human limits.

David Cass has died

david cass

Let me just remember a couple of things in his innovative,  outstanding and always thought-provoking intellectual legacy:

– extrinsic uncertainty, with Karl Shell (1983): DO SUNSPOTS MATTER?

– “His year devoted to the search for a necessary and sufficient condition for efficiency in the neoclassical growth model led to the remarkable condition that the sum of the inverses of the present prices of capital over the infinite future should be finite” (from the quoted Am. Ec. Ass. pdf).

Please look at:

Michele Boldrin: Shine on you, Crazy David

best introduction to Dave is perhaps this 1998, 26 pages interview with Spear and Wright, a nice piece of autobiography and contemporary history of economic sciences:

It starts with his oral interview with Ken Arrow … ! Real fun.

Not only his friends will miss David Cass.




riprende la sua tradizionale contro-informazione fattuale in campagna elettorale. A cura di Michela Braga (collaborate!) un poco di dati contro le  chiacchiere vanesie di Porta a Porta = la monnezza che puzza  in TV, la trasmissione comico-demenziale del “patto con gli italiani”: tu mi voti, io porto i miei avvocati corruttori fuori dalla gatta. 

Will Super Tuesday somehow affect the recession path?

february 8, 2008. Click this date for a 10 pages file of this week’s (February 8 to the 1st) first entries into this baby blog: depression or recession? At the moment, we might be still before the fork, and the blog title follows. Main arguments, dictated by the quickly unfolding events after the disputed Fed’s move:
FAQ 1: What if the Fed continues to cut the rate, at a rate of 125 points a month?
FAQ 2, Super Tuesday: Prof. Roubini argues the policy maker can’t stop the financial catastrophe. He is right,  but what if  a leadership and a new political process emerge from an America fed up with the establishment  and an overwhelming, unrestricted markets power?
Feb. 8, Frankfurt: ECB on hold (already changing adjectives on € zone inflation)
Feb. 7, Yesterday’s mood in Avenida Paulista (SP) was mixed feelings
Feb.5, Just an IMS Report for another Black Tuesday? The oddness of Wall Street boyz mood
Feb. 1, US non farm employment just negative (first time since August 2003).
MORE: a) in blog page SUBPRIME SURPRISES, there is a_primer_on_subprime.pdf, a 20 pp. still provisional, very draft work-in-progress, with a Political Economy analysis of the unfolding recession\depression, with perhaps original (at least, not textbook) policy implications:1. monetary policies have now counter-intuitive and counter-willing effects:

more money&credit, lower interest rates = deeper depression

2. fiscal policies (in the countries that can afford such a luxury) might do better, wasn’t the recession rooted in long term structural processes (à la Carlota Perez);

b) in the 30 pp. long file: 080131-0707deeprecessionblog.pdf – in blog style and reverse time order, there is the legacy of my posts before this blog started: many useful analyses and comments to what happened to the world economy in the past 9 months (when I had this blog in mind, like Jupiter Minerva, and Gods were planning to strike a recession to humans on some planet).