Bears still growl at the Sanctum Sanctorum of the policy elites

The Telegraph ^ | 9/4/2009 | Ambrose Evans-Pritchard

[bruinbirdman]

From Cernobbio

If arch-bear Nouriel Roubini has really thrown in the towel on our Great Contraction – as often claimed – this was not obvious here on the shores of Lake Como in Italy.

Speaking at the Ambrosetti Workshop – a sort of Davos/Bliderberg for food-loving policy elites – he said the best we can hope for is a long-hard slog for two or three years, with a rising risk of a double dip into “W-shaped” recession.

The poll of the 200 or so participants at the Villa D’Este (an ultra-posh hotel on the lake: Telegraph hacks stay up the hill in cheaper digs) found that the great majority expect the crisis to end in the second half of 2010. This is much later than the implicit assumption of the markets, which expect rate rises by January.

I grimly voted for option five: that the crisis would continue to worsen, by which I mean that the legerdemain of shifting losses onto the shoulders of the taxpayer – pushing the public debts to 100pc of GDP on both sides of the Atlantic, and 200pc in Japan – conjures away nothing. It merely stretches out the damage, and alters its shape.

Dr Doom said governments have indeed prevented a free-fall at contraction rates of 10pc (annualized) into what threatened to become a great depression. What do you expect after cutting rates to zero and blitzing of state support? The US alone has lavished $3 trillion of stimulus. “They got religion and brought out all their weapons from bazookas to missiles,” he said.

So yes, states have stepped in to offset the collapse in private spending. This cannot continue for ever. At some point, private demand must pick up the baton. It is not doing so yet. Indeed, it can’t.

US unemployment has

[parsifal]

I am still confused by the people who think its over. Unemployment is still high, and growing. Where is the demand going to come from to put people back to work? Have any of the people who think we are coming out of it, said how this is happening? I mean to say the Dow is going up, so we must be coming out isn’t really explaining anything. Why is the Dow going up? Demand is still pretty much flat.

parsy, who still thinks the worst is coming

[mo]

I could’nt agree with you more. In the ‘80’s the world communist bubble burst. It basically took a decade. This is the rupturing of the world’s socialist bubble. I actually think it started around 9/11...and is a much bigger bubble than communism...and will probably take another 10-15years.

[bruinbirdman]

" Why is the Dow going up?"

Millions of people still have pension funds. Every month, like clockwork, pension fund managers are investing new money.

yitbos

[campaignPete R-CT]

The DOW is going up because investors are still bullish! I am not complaining ... all the stuff I bought last winter at bargain prices, I am glad to sell and move into bonds with each rally.

Cpete, who has heard that the West is melting.