More from the Front Lines of the Financial Crisis

by Stephen Lendman, Baltimore Chronicle

In its latest economic outlook, Merrill Lynch economists “worry about inflation, or more precisely,” a lack of it. From crashing global equity markets, falling commodity prices, rising unemployment, stagnant wages, over-indebted households, declining production, the continuing housing crisis, and more. All pointing to several future quarters of negative growth. Showing that Fed chairman Bernanke will face “his greatest fear: deflation.” An analysis of the coincident to lagging indicators signals “deep recession.”

In his October 24, commentary, Merrill’s North American economist David Rosenberg sees “economic data deteriorating in a very serious way (and says) we are witnessing unprecedented stuff happen:”

• the two-year housing recession “is still far from over” with new lows in a number of key readings;
• it’s “morphed into a capex recession, industrial production” had its worst decline in 34 years;
• consumer confidence showed record declines;
• retail sales keep falling; evidence is that auto and chain store sales will show four straight down months; it’s happened only four other times since 1947, so “we’re living through a 1-in-200 event;”
• based on CPI data, prices are falling; at a rapid pace also seen only four other times since 1947;
• GDP will decline at 2% annual rate in Q 4; 4% in Q 1 2009 and 3.3% in Q 2.

Conclusion: “This recession is unlike any seen in the last five decades.” Typically caused by inflation, inventory cycles or aggressive Fed tightening. “This is a balance sheet recession deeply rooted in asset liquidation and debt repayment, and would seem to have more in common with pre-WW I cycles.”
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