Economist Nouriel Roubini says that an L-shaped near depression may be avoided given the policy measures undertaken by the Obama administration. All the same, in his RGE Monitor, he is now predicting that the current protracted U-shaped recession will not bottom out in the third quarter but will instead continue until next year:
One should recognize that US policy authorities – as well as the authorities of many other countries looked into the abyss of the risk of a near depression – given the free fall in global economic activity in the last two quarters – and decided to start using most of the weapons in their arsenals – bazookas, missiles, rockets, artillery, etc – in a financial policy equivalent of a Powell doctrine of overwhelming force in order to avoid a near depression. This is why now the risks of an L-shaped near depression – like the one that hit Japan after the bursting of its real estate and equity bubble – have been reduced.
