Dr. Doom is freaked out more than he was earlier!

A year ago Roubini was forecasting an 18-month recession with a U-shaped recovery; now, hes now expecting the downturn to last at least 24 months and possibly 36-months. He also sees rising risks of a Japanese-style L-shaped stagnation, i.e. a prolonged period with little or no economic growth.

“I was one of most bearish people [but] the economy has surprised the bears on the downside,” says Roubini of NYUs Stern School and RGE Monitor. “Whats happening in the world now is scary.”

via Even Dr. Doom Is Scared Economy Much Worse Than Roubini Predicted: Tech Ticker, Yahoo Finance.

Blessed is the one who finds wisdom,
and the one who gets understanding,

for the gain from her is better than gain from silver
and her profit better than gold.

– Proverbs 3:13-14 (ESV)

via Passage: Proverbs 3 (ESV Bible Online).

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Thomas Jefferson,  (Attributed)
3rd president of US (1743 – 1826)

The WSJ hits the Bush/Obama bailout mentality hard in their editorial “Barack Obama-san.” Politics aside, it’s a sobering review of what has happened to the Japansese economy after real estate and stock market bubbles burst and the government responded with multiple bailouts.

Here’s the chart that compares Japansese and US government debt as percentages of their respective GDPs:

This is a troubling reminder. Not a road to go down, right?

But we’ve already gone down that road. And I’m not talking about AIG or TARP.

You see, this editorial focuses on government debt. But the total national debt that includes individuals and businesses has already bloated!

A recent Morgan Stanley presentation highlights the spike of total debt in the US (on slide 6). Since the turn of the century alone, it has spiked from roughly 250% to 300% of GDP!

The lesson to be learned is more than the ineffectivity of public stimulus, which the WSJ rightly highlights. It is that, regardless of the source or destination of largess, its tantilizing short term benefits are dwarfed by its subtle, long term poison.

Just like binge eating, the pounds remain after the pleasure, and make it that much harder to cut back in the future.