U.S. is on a collision course with a double-dip recession, economist Stephen Roach warns
Economist Stephen Roach warns V-shaped recovery mania on Wall Street is leading investors astray.
According to Roach, the U.S. is on a collision course with a second dramatic downturn.
“The odds of a relapse, not just the virus but in the economy itself — the so-called dreaded double-dip, is very real,” the former Morgan Stanley Asia chairman told CNBC’s “Trading Nation” on Wednesday.
He notes recessions are historically double-dip. Roach anticipates this contraction will follow the same pattern despite its unusual origin.
“This behavioral capitulation on the demand side of the U.S. economy is going to continue to create a lot of problems for businesses, business hirings, [and] potential corporate bankruptcies in the second half of this year,” he said.
CNN Business/Anneken Tappe
This recovery will be a bumpy ride, says Goldman Sachs CEO
America has embarked on the long road to recovery following the pandemic lockdown, but the path back to a healthy economy is littered with obstacles, according to Goldman Sachs’ CEO.
“It will be a very very bumpy ride economically,” Goldman Sachs (GS) CEO David Solomon said Wednesday during an event with the Economic Club of New York.
Parts of the economy have shown signs of improvement in recent months, with the unemployment rate falling from its April peak and retail sales bouncing back. But this rebound could fizzle out in the coming months, Solomon warned.
“Even if — in the best case scenario — that the virus is eradicated or much more controlled […] I think we’ll run with very, very high unemployment for an extended period of time,” Solomon said, adding that America is still in the early stages of feeling the pandemic’s effect on the economy.
Gold price needs to rally another 34% if U.S. wants to normalize debt – CrossBorder Capital
It didn’t take long for the gold market to catch its breath after its initial break above long-term resistance at $1,800 an ounce. The precious metal is seeing a new surge in momentum and one research firm said that there is still room for prices to move higher.
Central banks around the world have pumped massive amounts of liquidity into financial markets to stabilize the global economy, devastated by the COVID-19 pandemic; however, analysts at CrossBorder Capital said that this is just the start of a much bigger trend.
“The mechanism that drives gold (and monetary inflation) higher is rising liquidity,” the analysts said. “Large debts need large financial sector balance sheets to facilitate their re-financing, or roll-over, and liquidity is one measure and source of this balance sheet capacity. Therefore, growing debts require ever larger liquidity pools.”
In the current environment, the analysts described gold as “the ultimate standard of value.”
‘The stock market no longer thinks it needs the economy if it has the Fed,’ David Rosenberg says
It’s hard out there for a bear.
Millions of jobs have been lost, some likely permanently. Small businesses are failing. Government debt is ballooning. And yet the U.S. stock market just keeps going up. Economist David Rosenberg, who’s often more bearish than the general consensus, including now, has an explanation. “I realize that the stock market no longer thinks it needs the economy if it has the Fed,” Rosenberg wrote in his morning commentary Wednesday.
That is, as long as the Federal Reserve keeps pumping monetary stimulus into the financial system, the financial markets can continue to ignore the awful state of the economy. And in case you’re not clear on that topic, Rosenberg is happy to remind you. “Consumer activity is starting to cool off,” he notes, the holiday shopping season is likely to be “weak,” consumers are likely turn decidedly frugal, 68% of unemployment insurance recipients make more on the dole than while they were working, the U.S. now has the biggest debt-to-GDP ratio since World War II, with a much older population, lower-for-longer yields won’t support pensioners, and on and on.
Perhaps more damning, in Rosenberg’s telling, isn’t that the market is disregarding the real economy, or that both are dependent on central bank stimulus. Both are understandable. What’s really disconcerting is that the market is behaving like the ultimate creepy ex-boyfriend: it won’t let the central bank leave.