Sunday, October 23, 2011

Tim Duy on a double-dip

A major credit event in Europe looks inevitable. Would a European meltdown endanger the US recovery? We are looking at two channels, trade and financial. I tend to discount the trade channel. As a general rule, I think the propagation of such shocks is too weak to alter the fundamental cyclical forces underlying the US economy. The potential for financial shocks, however, keeps me up at night - this is the key to the US recession story. There is a nontrivial chance that credit event in Europe triggers a credit event in the US.

Read the whole post, On That Double-Dip at Tim Duy's Fed Watch

This has been my thinking for some time. Real economy is recovering — very slowly, but the financial system is still badly impaired. Any significant shock can tip things over the cliff, and the deteriorating situation in Euroland looks like another Credit Anstalt moment just waiting to happen. My money is on another shock, followed by the second leg down in Great Depression II. The crisis in Euroland could provoke it, but there are a number of other things hanging by a thread ready to break, too.


GLH said...

I wonder if Mr. Bernanke ever looks out of the window of his ivory tower to see what is going on in the street.

googleheim said...

More Looney Tunes in Economics ?

The Germans and French flirt with disaster to prevent their Euro from appreciating too much and then also from depreciating too much.

So they find the sweat spot with this game of tennis.

Greece is the ping pong and American is the one who has to come in an provide open swap lines of credit to the Euro boyz.

It's all a game to whiplash the Arabs whilst they have their spring time frollicks -

The game is a perfect excuse for the war supports and for draining Euro liquidity from the Arab nations.

Then Obama his role is only as Nobel Peace Prize lapel wearing foo
who is like "Reagan" was to the soviet block melt down.

His somewhat quasi Muslim-ness has the right currency to make it all look OK to everyone.

However, Obama will not even go down to Wall Street and meet some of the Occupy 99'ers because
he is the clutches of big money puppetry.

fact or fiction ?