David Rosenberg: We're In A Depression, Not A Recession

In his daily briefing to investors Tuesday, Gluskin Sheff economist David Rosenberg replaced the R-word with the D-word.

The "current economic malaise" is a "depression, and not just some garden-variety recession," said Rosenberg in a note to clients today, as reported by CNBC. Rosenberg, who's been issuing warnings about a double-dip recession, was formerly the chief economist at Merrill Lynch.

Like the Great Depression of the 1930s, the U.S. economy as of late has posted a series of quarterly GDP bounces and stock market gains, he noted. Yet, the tidbits of good news are the same kind of fluff that gave our 1930s predecessors a false sense of optimism amidst unsustainable growth, Rosenberg argues.

As CNBC points out, Rosenberg wrote, "the 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent." Rosenberg proposes that we may be reliving history: "If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3 percent."

In a separate report this morning ("Breakfast With Dave"), Rosenberg added this:

"Look, we can understand the need to be optimistic, but it is essential that we recognize the type of market and economic backdrop were are in. The markets are telling us something valuable when, after a period of unprecedented government bailouts, incursions and stimulus programs, we have a 2-year note auction that sees the yield dragged to new record lows of 0.46%."

And Rosenberg offered us some more gloom on housing:

"So let's get this straight. Mortgage rates have tumbled nearly 100 basis points in the past year to a record low of 4.42% for the 30-year rate, yet existing home sales collapse a record 27% MoM to an all time low (data only back to 1999 for total sales) of 3.83 million units at an annual rate? Are you kidding me?"

Is all this just a gloom and doom forecast or is it realism, as Rosenberg calls it? What do you think?

Comments

[diddleydee]

01:55 PM on 08/29/2010

Until the US strategically invests, minimizes speculative behavior, champions the middle class and invests in education, the country is TOAST!

[DFC1]

12:41 PM on 08/29/2010

The world is changing very quickly, now the world trade is recovered and now it is at similar levels than before the Great Crisis, and USA and most of the others developed countries (except Germany of course) are not driving the demand for the first time in the History, there is a huge shift in the economic and strategic balance in the world, and the emerging countries has developed enough critical mass to sustain the movement, so be ready for big changes in the next future

[IhateNeoCons]

05:21 AM on 08/28/2010

The major problem is that Americans have not saved for 3 decades. Common-sense tells us that even if we didn't have to make up a large chunk of the money that should have been saved (which we do) we now would have to save more than previously. What part of this looks like sustained economic growth any time in the next decade to any of you? Do you hear ANYBODY talking about this problem? Of course not. Nobody, especially politicians, want to tell the voters that the entire economic system has been pilfered for three decades by the wealthy. Especially while they are debating whether to extend the Bush tax cuts for these "struggling" people right before an election. People need to act like they are living during WWII. They need to start victory gardens to feed themselves and their relatives and neighbors. They need to cut back on all unneccesary expenditure (read, not necessary for survival) and they need to wait this out. Will this make things worse? Of course. But the worst is coming anyways. It won't be stopped. Those who are the first to recognize this and swallow the bad tasting medicine will be the best off.

[guveqzero]

02:28 PM on 08/28/2010

The first to suffer are the unemployed. And as we all know today, bankers never suffer due to government support. What kind of medicine is this?

[niceshoes60]

07:45 PM on 08/27/2010

We are now an oligarchy.

(As I recall, Ben Stein, of all people, said this about two years ago. I wonder if he would stand by those words?!?)

[zanzy]

09:12 AM on 08/28/2010

He does not have the guts to bite the hand that feeds him. His comic career is in the toilet and he is a big coward. What suprises me is how no one sees this? Rush, Beck and Palin will say anything for a buck or two.

[Longtallsally]

11:11 AM on 08/29/2010

Like all politicians?

[keepyourheaddown*]

07:07 PM on 08/27/2010

LIe Cheat and Steal!

What did you think was going to happen???

[keepyourheaddown*]

07:04 PM on 08/27/2010

just a matter of time before the complete collapse...it's alrady begun...

LIE CHEAT AND STEAL!

WHAT DID YOU THINK WAS GOING TO HAPPEN???

[metaluna]

03:53 PM on 08/27/2010

This horror will end only when we change our political system to eliminate powerful globo-corp interests. All else is folly and doomed to failure.

[bodel]

10:26 PM on 08/27/2010

A M E N !!!!!!!!!!!!!!!!!
These fools aren't even aware that a worldchanging political transition is at hand.

The tea baggers and the progressives are poles apart...but their unifying theme is disgust with how government does not function for the PEOPLE...as in "we the People"..

It is very near at hand...

[Overtone]

12:53 PM on 08/27/2010

ENDING THE SECOND GREAT DEPRESSION!

The Great Depression ended when the U.S. mobilized to fight the Second World War. Unemployment fell to 2%.

This Second Great Depression (call it whatever name you prefer) can end by mobilizing to supersede fossil fuels in time to avoid what may be life threatening Global Warming.

See the analysis pro and con concerning the threat of a possible climate Tipping Point at http://www.aesopinstitute.org

If, as I believe, the threat proves to be real, we need a worldwide effort to leave fossil fuels behind much faster than conventional wisdom would believe is possible.

In spite of a legion of skeptics, it can be done!

Revolutionary, cost-competitive, breakthrough renewable technologies are being born. They can supplement the truly effective carbon free systems already available.

A few months after Pearl Harbor was attacked, Ford completed a bomber every 59 minutes at the Willow Run factory.

That same kind of enthusiastic 24/7 effort can produce surprising results and dramatically reduce unemployment.

It will inherently require and produce the missing additional economic stimulus.

Ironically, this approach will have found a way to regain real economic health that, once the threat is widely understood, can enjoy strong White House and Congressional support.

Insuring reasonable odds for the survival of our children and grandchildren has the potential to provide an emotional force that can awaken widespread latent leadership.

Wake up folks! There is a huge job waiting to begin. And we better do it fast.

[Stopinstigating]

12:02 AM on 08/28/2010

Where is the capital going to come from?

[Overtone]

02:33 AM on 08/28/2010

Winding down absurd military spending would be a good place to start.

We are still spending a fortune on weapons that are primarily job creation programs in Congressional districts.

[kfdan]

04:00 AM on 08/28/2010

End the FED and have the government print money and control the out-put just as it was done under Lincoln! That money would be debt free!

[IhateNeoCons]

05:23 AM on 08/28/2010

Won't happen.

[Vernadine QuanSoon]

12:42 PM on 08/27/2010

Yeah, but he did not see the MERRILL LYNCH MELTDOWN coming.

[Gatormouth]

10:28 AM on 08/27/2010

“Recession or Depression? Maybe, as Stan Laurel once said, "Why this is neither pig, nor pork”! The bump of statistics leading some to call this a “second“ recession may have been the equivalent of a stock market “dead cat bounce” writ large.

This was to be a scripted massive failure of our government produced by deliberate corporate corruption of our political/social system over an extended period of time. This is the pursuit of the Friedman Corporatist ideal initiated by the Regan Administration, and continued by members in both major parties since. We are now effectively ruled by organized Post National corporations led by lobbyist groups like the U.S. Chamber of Commerce.

Their goals are low taxes on Corporations and the wealthy, de-regulation and "Free Trade" allowing export of investment capital, jobs, and industries. Massive expenses for "mis-managed" economies and avoidable wars is bleeding away the availability of funds for social support and welfare ACCORDING TO PLAN! Why should the corporations let us get back up after this success? MISSION ACOMPLISHED! An easily controlled "rump" party purged of moderates is ready to take control

All the corporations have to do is to keep what has been won in place for one more general election and the free corporate funding of elections along with a rigged voting system will do the rest. So close! Just keep us “Hoping” and not reacting for a little bit longer.”

[alan2a]

12:03 PM on 08/27/2010

Well said. Welcome to the demise of America and American Democracy and welcome to the Corporate Oligarchy coupled with the new orthodoxy of hating Mexican, Muslims, Blacks, immigrants and trashing the 1st amendment, the 14th amendment, the 17th amendment to the constitution as well as the bill of rights. Welcome to the new National Socialist Germany of the 21st century. Welcome to the third world.

[Stopinstigating]

12:18 AM on 08/28/2010

So why shouldn't the Cloward & Piven strategy be considered? http://en.wikipedia.org/wiki/Cloward%E2%80%93Piven_strategy

[Gatormouth]

02:13 PM on 08/28/2010

A National Guaranteed Income seems politically very difficult to obtain, and we did very well under the controlled corporation and labor scheme developed under New Deal politics anyway. We did discuss a National Wage (different) that merely set standards for wages and benefits which could result in higher living standards.This was often discussed with proposals for an Universal Service obligation which would be a "13"th year in high school which would include, variously, military training, public interest training in conservation, health or social careers, trade education through Jr. Colleges or 4 year schools (like the old California plan for Higher Education done away with by Regan). This would involve a reliance on a trained "Army in Reserve" not a standing Army.

We must start by firmly rejecting the Regan/Thatcher version of Fascism and recover what has been destroyed. We must re-industrialize, re-establish controls including Sherman Anti-trust, and re-establish sane taxation and import tariffs to protect National Corporations as well as labor. This alone worked very well before!

The Constitution STARTS with "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence,[1] promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America." The "general Welfare". Not just that of one class of citizen - and Corporations are not even citizens!

[Joe Padilla]

03:51 AM on 08/27/2010

Let's say that you had a 35% tax on everything you bought. And there were no business taxes and no personal taxes. And they gave cash rebates to smaller business, companies that created jobs and people who made $50,000 or less, say $10,000 all the way up to $17,000 to cover any tax they paid for the year, so that they wouldn't pay any tax.

Then what you have is a tax on consumption. And even the buyers of Chinese goods would pay it. BUT THE CATCH IS we could give American companies rebates for keeping their operations here, and if they moved they wouldn't get the rebates.

This would fix our problems in a hurry because right now the best way to get out of paying USA taxes is to buy Chinese. It also encourages savings and economy which would help the environment.

Think about it, there would be a tax on everything, but after the rebates the tax really is mostly paid on foreign goods, even oil. This brings the advantage back to the USA

www.fairtax.org

[EJavaM07]

09:48 PM on 08/28/2010

Well said, and so incredibly simple.

And simple means easy to implement.

[niceshoes60]

02:21 AM on 08/27/2010

Some of us have been saying this for a while now. I still think that if the housing crisis had been handled aggressively back in 2007-2008 our economy would be a lot stronger now. The reason the Bush admin. gave for not helping homeowners with their mortgages was that it would have been "enabling" their bad decision making and irresponsibility. What about TARP - wasn't that enabling? Oh, that's right. Enabling corporations is okay, but to hell with us "small people." So, the whole country now suffers.

[metaluna]

03:56 PM on 08/27/2010

Unfortunately, our current potus has failed to stabilize the housing market. To be fair he's tried but he's far too shackled to massive corporate interests to make real changes.

[niceshoes60]

07:41 PM on 08/27/2010

Indeed.

[Ratdog100]

12:46 AM on 08/27/2010

There are just words. Depression, Great Recession. It doesn't matter. It still sucks.

[xilduq]

12:24 AM on 08/27/2010

the D words are not allowed to be publicly spoken: depression, deflation

we'll just call it a Great Recession

[Oldie]

11:32 PM on 08/26/2010

Lets see now, this guy was with who? Merrill Lynch? And just where is Merrill Lynch now? And somebody is listening to him?

[Ichiro51]

12:02 AM on 08/27/2010

Oh, please. As if anyone who has ever been part of a failed business automatically has zero credibility.