Global Economy in Danger of Backslide?
That's what Nouriel Roubini, an economics professor at Stern School of Business at NYU, wrote in a Financial Times op-ed Sunday. In forecasting just what sort of recovery the world will embark on – a quicker "V-shape" or slower "U-shape" – Roubini raises the prospects of a possible "W-shaped" rebound, which will see near-term growth followed by another recession.
What might cause this? Roubini writes that the exorbitant deficits countries like the U.S. are currently running up pose a dilemma for lawmakers. They could raise taxes and cut spending, but that might squelch the recovery before it really gets a chance to begin. They could also ignore deficits and risk a recovery-suppressing bout of inflation.
There's also the fact that food and energy price are on the rise – at a rate higher than the economy warrants, Roubini writes – and there's reason to fear they may get even higher. With a lot of extra cash on hand, thanks to taxpayer-financed bailouts, traders might speculate on commodities (remember when oil topped $145 a barrel?). But a spike of that amount could lead to a similarly prodigious shock to the world economy.
In all, Roubini sees a "U-shaped" recovery, meaning slow growth that could take a couple of years. But the dangers of a "double-dip recession" are out there.