Two more credible prominent economists (check their track record) have weighed in on the persistent risk of a double dip W-shaped recession.
OECD economist Dr Adrian Blundell-Wignall, warns of a 10 year long de-leveraging process on ABC news:
Double dip recession looms: OECD economist
One of the OECD's leading economists says there is a strong chance that the world's leading economies could quickly slide back into recession. The deputy director of the OECD's financial and enterprise affairs, Dr Adrian Blundell-Wignall, has told ABC1's Inside Business program that the threat of a double dip recession remained because problems in the banking system have not been solved.
"There are many icebergs the ship has to negotiate before we're out of jail here. This is going to be a 10 year process, not a one year process," he said
Dr Blundell-Wignall says many of the banks' problems have been hidden by changes to accounting rules and their most toxic assets have been shifted to the balance sheets of the big central banks in the US and Europe.
"That's basically taking the bad assets as collateral for loans from the central banks to these banks," he said.
"Well they have to be paid back and the question is if you put back this collateral back to them what would their situation be? That's why credit isn't supporting this recovery."
Dr Blundell-Wignall pointed out these were his own view and were not necessarily those of the Paris-based OECD. (full story here http://www.abc.net.au/news/stories/2010/02/28/2832386.htm?section=justin)
And S&P chief economist says:
DOUBLE-DIP RISK PERSISTS: S&P
/ The U.S. would be at risk of a double-dip recession if things go awry in the global financial markets as a result of a major sovereign default, Standard & Poor's chief economist, David Wyss, said on Friday. NEW YORK
Risk aversion has risen in global markets in recent weeks on concerns that sovereign debt problems centered on
may threaten the pace of economic recovery. Greece
U.S.housing data and a persistently fragile labour market have also reawakened concerns that a recovery in the economy may prove anemic. U.S.
To be honest, sovereign debt default, isn't such a big risk if it only happens to one or two countries in a decade. The IMF and World Bank have enough absorptive capacity to rescue a nation or two. If fact that's happened regularly over the past 400 years. But what is unprecedented this time around is that over 20 countries (with high CDS scores) are at risk of bankruptcy. (N.B. countries typically default on national debt first and then international debts) What if all the dominoes tumble down all at once? Who will come to the rescue then? A question that no one seems to want to ask or debate in public.
Walter Derzko, Smart Economy, Toronto