More Gloom from Dr. Doom

Here is an article by Nouriel Roubini questioning perceptions of "the worst is over" optimism that has swept the stock markets around the world:

Mild signs that the rate of economic contraction is slowing in the United States, China and other parts of the world have led many economists to forecast that positive growth will return to the US in the second half of the year, and that a similar recovery will occur in other advanced economies.

The emerging consensus among economists is that growth next year will be close to the trend rate of 2.5 per cent.

Investors are talking of 'green shoots' of recovery and of positive 'second derivatives of economic activity' (continuing economic contraction is the first, negative, derivative, but the slower rate suggests that the bottom is near).

As a result, stock markets have started to rally in the US and around the world. Markets seem to believe that there is light at the end of the tunnel for the economy and for the battered profits of corporations and financial firms.

This consensus optimism is, I believe, not supported by the facts. Indeed, I expect that while the rate of US contraction will slow from -6 per cent in the last two quarters, US growth will still be negative (around -1.5 to -2 per cent) in the second half of the year (compared to the bullish consensus of +2 per cent).

Moreover, growth next year will be so weak (0.5 to 1 per cent, as opposed to the consensus of 2 per cent or more) and unemployment so high (above 10 per cent) that it will still feel like a recession.

...

Still, this global recession will continue for a longer period than the consensus suggests. There may be light at the end of the tunnel -- no depression and financial meltdown. But economic recovery everywhere will be weaker and will take longer than expected. The same is true for a sustained recovery of financial markets.

Go read the whole article. It will give you reasons to have second thoughts about the "green shoots" that Obama is talking about.