Talk to the banking and brokerages types with bullish economic leanings and they'll tell you in no uncertain terms that you've got to be bonkers to pay heed to anyone forecasting a double-dip recession.
Those who rule out a double dip generally insist the economy is on the upswing and that two biggest economic worries -- the housing bust and high unemployment -- will take a decided turn for the better before year end. They also seem to share the thinking of former Federal Reserve Chief Alan Greenspan, who argues that a double dip is unlikely. "Economic momentum is building up, it's just beginning, and it has a long way to go," he has stated.
That's not what you'll hear, though, from one-dogged tracker of world currencies, Bryan Rich, editor of the World Currency Alert, a newsletter out of Jupiter, Fla., who figures the myth being perpetuated by Greenspan is surely graveyard bound. Likewise, the idea of a 2010 recovery, he suggests, may be little more than administration and Wall Street hokum.
A key reason is the worsening sovereign debt crisis in Europe -- a distinct catalyst, he says, for slowing global growth. What's more, Rich contends another worldwide recession kicking off later this year in which he includes the U.S. is a much higher probability than the market expects.
In response to those who suggest the European Union's $1 trillion rescue package will help turn things around for the financial weaklings and foster faster GDP growth, he ridicules the notion that you can assign a GDP growth number in the midst of a growing financial crisis. Saddled with bloated debt and deficits, Europe, observes Rich, is as troubled as ever and global markets will suffer.
In other words, Europe's woes could squash our economic recovery.
His thoughts on Europe's plight are particularly relevant at this juncture, since a number of economic forecasters dismiss the possibility of a double dip, contending that Europe's debt crisis is beginning to ease. As proof, some point to recent successful bond auctions in Spain and Italy and the positive impact of the EU's $1 trillion rescue package.
Rich's view of such thinking: Hogwash! That package bought time and stabilized the situation temporarily, but it doesn't change anything structurally, he says. You need fiscal unity in the EU; you can't have each Euro country deciding its own fiscal policy because that puts them, as is the case now, on a crash spending course.
Adding to Europe's woes, Rich observes, European banks are stuck with a $1.6 trillion exposure to the financially troubled PIIGS (Portugal, Italy, Ireland, Spain and Greece).
Meanwhile, he sees the debt crisis spreading. The United Kingdom is next, he says, followed by Japan and the U.S.
Further aggravating matters, Moody's recently downgraded Greece's debt to junk status. Fitch has also gotten into the act, describing the UK's fiscal challenges as formidable, which has led to speculation the rating agency might soon cut the country's triple A debt rating. Still another country, Hungary, which got a $24 billion bailout in 2008, is in hot water. A government official there observed the economy was in a very grave situation, which has raised fears the country could default on its debt.
Rich is hardly alone in his double-dip concerns. Some prominent names are also hoisting warning flags, among them Ben Bernanke (even though the Fed is officially predicting 3% to 4% GDP growth in 2010), Harvard economics professor Martin Feldstein, the World Bank and Nobel Prize-winning economist Paul Krugman.
Krugman sees a 30% to 40% shot of a double dip in the second half as fiscal and monetary stimulus peters out. His view: Growth in the second half will slow as the Fed ends purchases of securities, the government's $787 billion of stimulus winds down and corporate America stops rebuilding inventories.
Whether we get another recession before year end is anybody's guess. But the 27 million unemployed Americans, the former owners of about a million vacant homes in search of buyers and the many thousands of people butchered by the British Petroleum oil spill will tell you it's already here.
What do you think?
E-mail me at Dandordan@aol.com