Monday, August 24, 2009

Double dip?

It sure looks that way according to Nouriel Roubini. One thing in particular caught my eye:
Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.
I've been more than a little concerned that speculators' tendency to go wild will lead to another replay of 2008. I know that there have been some rumblings about regulating some commodities speculation - futures markets in particular. This would be a good time to proceed on that front. In the mean time, from the rest of Roubini's article, the expectation seems to be that we're done with cliff diving, but that we'll be scraping the bottom for the foreseeable future. In other words, the "recovery" will not feel like a recover to anyone outside of the investment banking industry.

Note in the margin: see what Yves at naked capitalism has to say about Roubini's latest article.

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