Despite all the stimulus packages and bailouts, the US financial system is broke.
That’s the view of Nouriel Roubini, the economics professor who predicted the global economic collapse, long before most people.
He adds there is a “rising risk of a global L-shaped depression that would be even worse than the current, painful U-shaped global recession”.
That’s in sharp contrast to the view of other economists, the IMF, and the local business press, who are hoping for a small recovery in 2010. Some even are hoping for a rally in the second half of this year.
But Nouriel says any rally or recovery from China’s and the US’ stimulus packages this year is likely to be illusory, a sucker’s rally.
Today, Najib is going to announce a multi-billion mammoth second “stimulus package”. But will it be more money down the drain – apart from the usual jobs for the boys with public money?
Nouriel points out that fiscal policy stimulus in the US and China will have limited impact:
…given the collapse of five out of six components of aggregate demand (consumption, residential investment, capital expenditure in the corporate sector, business inventories and exports), the stimulus from government spending will be puny this year.
He also says the AIG bailout is a cover for the bailing out of its creditors:
So let us not kid each other: The $162 billion bailout of AIG is a nontransparent, opaque and shady bailout of the AIG counter-parties: Goldman Sachs, Merrill Lynch and other domestic and foreign financial institutions.
Read the full Forbes article here.