American Pie in the Sky

by Nouriel Roubini Nouriel Roubini is Chairman of Roubini Global Economics ( and a professor at New York University’s Stern School of Business. 20.07.2012


For the last three years, the consensus has been that the US economy was on the verge of a robust and self-sustaining recovery that would restore above-potential growth. That turned out to be wrong, as a painful process of balance-sheet deleveraging – reflecting excessive private-sector debt, and then its carryover to the public sector – implies that the recovery will remain, at best, below-trend for many years to come. 

Even this year, the consensus got it wrong, expecting a recovery to above-trend annual GDP growth – faster than 3%. But the first-half growth rate looks set to come in closer to 1.5% at best, even below 2011’s dismal 1.7%. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices, and a resurgence of US manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.

The reality is the opposite: for several reasons, growth will slow further in the second half of 2012 and be even lower in 2013 – close to stall speed........


A significant equity-price correction could, in fact, be the force that in 2013 tips the US economy into outright contraction. And if the US (still the world’s largest economy) starts to sneeze again, the rest of the world – its immunity already weakened by Europe’s malaise and emerging countries’ slowdown – will catch pneumonia.


Get 24 hour access to the whole article for $0.2.

Recent articles