Brown Manure, Not Green Shoots

That is the title of a column over at Forbes by Nouriel Roubini, the economics guru from New York University who has probably been the most right so far on the current financial crisis.

His comments are on the June unemployment report, which, of course, was pretty grim at 9.5% unemployment.

He says its not the end:

" With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer--around August or September--and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions."

He may well be too optimistic. This is by far the worst recession since the Great Depression, and if anything goes wrong....well, another Great Depression could occur.

And the jobs report is not all there is to it:

"The job market report is essentially the tip of the iceberg. It's a significant signal of the weaknesses in the economy. It affects consumer confidence. It affects labor income. It affects consumption. It affects the willingness of firms to start increasing production. It has significant consequences of the housing market. And it has significant consequences, of course, on the banking system."

Does this latter mean that the government is going to feel like it has to pour a lot more money into the bottomless pit that is our banking system? Just think that for every trillion dollars that goes to the banks every household of four could get $130,000 in cash. There has been several trillion, and much of it has been added to the national debt. So instead of getting the cash, each household has, in effect, given it to the banks.

Roubini does not have an optimistic outlook:

"....large budget deficits and their monetization are going to lead--toward the end of next year and in 2011--to an increase in expected inflation that may lead to a further increase in 10-year treasuries and other long-term government bond yields, and thus mortgage and private-market rates. Together with higher oil prices driven up by this wall of liquidity rather than fundamentals alone, this could be the double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011. "

My take is that the outlook is grim for another year or two, and that the government is going to try another round of bank bailouts, along with having severe pressures put on to bail out profligate state and local governments. Don't look for anything for the people, though. This government is more interested in taking care of the politicians and the banks. I do suspect, however, that ACORN will get its "share."