David Rosenberg recently spoke to WealthTrack’s Consuelo Mack about prospects for the US economy. Rosenberg believes that upside to US economic growth will continue to be constrained by high levels of debt. Despite historic levels of fiscal and monetary stimulus, "no major economic indicator that measure the economy from employment to GDP to industrial production to real incomes has managed to get back to their prior cycle highs in late 2007", notes Rosenberg. Like me he believes that we are in the modest upcycle of a longer depression driven by a secular decline in private sector debt, the flation trend being deflation, not inflation.
On Europe, Rosenberg openly questions whether MF Global was the Bear Stearns event of 2011, preceding a Lehman-style bankruptcy and panic. He also reminds us that currency unions have not succeeded in the past. His view is that the ECB will have to step in and change its mandate if the European currency union is to have any chance of success.
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P.S. – Right now, this is a depression with a small ‘d’, meaning we have not seen the kinds of economic pain in the United States that was a hallmark of the Great Depression. However, risks do remain.