David, Rosenberg, Merrill Lynch's chief North American economist, says the US Remains Firmly In Recession.



Merrill Lynch’s David Rosenberg, the first economist from a major bank to declare a US recession was underway back in early January, argues that recent unemployment figures show yet more evidence that the US economy is a deep recession.

My Comment

It is highly improbably for jobs to decline 7 consecutive months and to not be in recession. Now Canada is following suit with a shocking loss of 55,000 jobs in July. Please see Canada, Japan Head For Recession for more on the Canadian jobs story.



Pointing to last week’s news that employment has now declined for six months in a row, Mr Rosenberg, Merrill’s chief North American economist, says that “at no time in the past 50 years has this happened without the economy being in an official recession.”



My Comment

Americans need radical surgery to revive country's economy

The US economy is in recession. Period. And it has been in a recession since January. This is the mantra of David Rosenberg, the first Wall Street economist to predict America's current economic woes, back in January, and perhaps one of the most bearish in the economic fraternity.



"The path to financial ruin is littered with calls of a bottom, and I don't think you want to confuse intermediate bottoms with fundamental bottoms; I think that is quite a dangerous game to play," he warns. "I think what separates my call, say from the consensus, is that I don't necessarily think this is going to be a mild flash in the pan. I think this is going to be a long recession."



"This is an epic event; we're talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007."



But more importantly, Rosenberg argues, is what must take place in the household sector - a sector already ravaged by rising fuel prices, a stagnant housing market and rising levels of unemployment.



In spite of all those problems, Americans are beginning to reduce their debt exposure - as seen in the savings rate, which rose from 0.3pc to 2.6pc in the last three months, the third steepest quarterly increase since the Second World War.



Before the US economy can truly begin to expand again, Rosenberg believes the savings rate must rise to pre-bubble levels of 8pc, that the US housing stocks must fall to below eight months' supply, and that the household interest coverage ratio must fall from 14pc to 10.5pc.



"It's important to note what sort of surgery that is going to require. We will probably have to eliminate $2 trillion of household debt to get there," he predicts, saying this will happen either through debt being written off, as major financial institutions continue to do, or for consumers themselves to shrink their own "balance sheets".



"American households own more than $4 trillion of consumer durable goods. So something tells me that is going to be a venue for shrinking the household side of the balance sheet.



"We're talking about the silverware, the old antique couch in the basement, unwanted or expensive art," he goes on. "This is the future, the future is frugality.

This is the future, the future is frugality

Cool To Be Frugal

Attitude Changes Are The Key

Understanding Deflation

Oil Shock

Oil Shock

Deflation is Not Coming, Deflation is Here.

Credit is contracting by any reasonable measure. It would be contracting at a stunning rate if marked to market. And from a practical standpoint marked to market is how it must be considered, even if there is no direct measure (which I might add is on purpose). Instead it is still hidden in marked to fantasy level 3 assets and in SIVs and other off balance sheet vehicles. See Not Practical To Tell The Truth for this line of reasoning. M3 is simply not a reasonable measure of credit, nor is MZM. Inquiring minds will want read Bank Credit Is Contracting for more details.



Trillions of dollars of housing wealth has been wiped out, yet laughably some still talk of hyperinflation. There has never been a hyperinflation in history where land prices have fallen like they are now. In fact, there has never been hyperinflation where land prices have declined at all, barring some obscure war zone perhaps.



Bank writeoffs have hit $500 billion and $2 Trillion is coming. "Yes, That's $2 Trillion of Debt-Related Losses", says Nouriel Roubini.

The Printing Presses Are Gearing Up. Will It Matter?

To Scroll Thru My Recent Post List