David Rosenberg: European Crisis at Existential Moment
Bloomberg’s Tom Keene and crew interviewed David Rosenberg, chief economist and strategist at Gluskin Sheff, to get his views on the economy and markets. Rosenberg gained notoriety for his bearish forecasts on the economy before the 2008-2009 economic crisis.
Rosenberg said the risk of going into recession is growing because the economy is at a stall speed of two percent growth.
Keene showed a chart indicating a rolling over of the CRB index. Rosenberg commented the weakness in commodities had nothing to do with the U. S. economy, but was related to the leakage of the European economy spilling over into Asia.
Rosenberg said there was uncertainty and inaction because households and businesses don’t know what their tax rate is going to be next year.
Rosenberg commented on the European crisis while Keene pulled up a quote from Rosenberg:
“Its quite possible the EU summit will produce something tangible, but we aren’t holding our breath. Two years of priming the pump did not save Greece.”
Rosenberg indicated the European crisis is coming to an “existential moment” because several of the larger countries (Spain and Italy) can’t fund themselves with rates low enough to bring down their debt/GDP ratios.
According to Rosenberg, Europe can’t grow their way out of the dilemma, but will need to restructure debts.
Regarding housing, Rosenberg said it will take 2-3 years to clear out excessive inventory and put a definitive floor under home prices.
The interview continued with Rosenberg commenting on Bernanke’s strategy (more QE is coming), what the optimistic economists are getting wrong, what could turn him into an optimist, and the resurgence of regional banking,