Friday, October 24, 2008

Roubini predicts two-year recession

The US economy is entering a two-year recession that will be longer and deeper than previously feared, said Nouriel Roubini, a well-known economist and professor at New York University.

"I believe we're going to have two years of negative economic growth," Roubini said on CNBC. "The last two recessions lasted only eight months each ... This time around this is going to be three times as long, three times as deep. This is going to be the worst recession the US has experienced since the 1980s."

A slowdown in global economic growth combined with continued problems in credit markets and housing will haunt the economy, Roubini said. ...

"I believe that the worst is still ahead of us. I think that the next few weeks and months are going to be negative surprises on the economy," he said. ...

"But we're going to have a severe recession. If this is going to be a two-year recession, that's not priced by the market. And there are significant downside risks for the stock market and credit markets in my view," he said. "Yes, we're going to avoid the Great Depression, we're going to avoid a 10-year stagnation. That's not going to be the case."
Notice that he predicts the worst recession since the 1980s, not the worst since the Great Depression. When economists say that this is the worst financial crisis since the Great Depression, many economically-challenged journalists incorrectly report that this is the worst economic crisis since the Great Depression. A financial crisis (affecting the financial system) and an economic crisis (affecting the broader economy) are not the same.

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