There is an imponderable dichotomy between the economic forecasters on Wall Street and the ugly reality on Main Street. With the Dow Jones having surged more than 60% since the lows that followed the collapse of Lehman Brothers and the onset of the global financial and economic crisis in the fall of 2008, there is increasing banter by Wall Street talking heads that the rally in equities reflects a logical analysis of the economic health of America and the conviction that the Great Recession is truly over and a return to robust economic growth is just around the corner. Call it the Street’s version of Fed Chairman Ben Bernanke’s proverbial “green shoots,” laced with steroids.
That is Wall Street’s prediction of where the U.S. and global economy is headed. As for myself, I will stick with my own look into the economic future, found in my book, “Global Economic Forecast 2010-2015: Recession Into Depression.” The essence of my forecast was that 2010 would give an illusory impression of an exit from the Great Recession, fueled by a massive explosion in public indebtedness, the so-called stimulus spending engaged in by most major advanced and developing economies. However, I also forecasted that unemployment would remain at historic highs; that and the rising level of public debt in many advanced economies would lead to a worsening sovereign debt crisis in 2011, culminating in a catastrophic collapse in public finances in major economies, especially the United States. This, I surmise, will transform a recession into a global depression.
So we are left with two contradictory views of the economic future, with no room in between. According to Wall Street, 2011 will be a bumper year for the global economy, with impressive levels of quarterly growth in the United States. As for myself, I believe that 2011 will be an “Anus Horibilis,” as the Romans would say during the years of decline of their empire; a truly appalling bummer of a year in terms of global economic health.