[News] Recession in 2008, Depression in 2009

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RECESSION 2008 → DEPRESSION 2009



1929 to 1939 - The World First Great Depression

The Great Depression (1929-1939) explained: http://en.wikipedia.org/wiki/Great_Depression

WHAT’S THE REAL PROBLEM

As usual, we are concentrating on the effects while the real problem goes un-noticed. While the world is speculating as to the end of the defaulting sub-prime mortgages and its resulting CREDIT CRUNCH, both of which are only EFFECTS, of the real problem of MASSIVE OVERCAPACITY and MASSIVE REAL ESTATE OVER BUILDING of both residential and commercial properties. Concentrating on reducing interest rates (which caused the problem in the first place) will actually make matters worse; witness the last two rate cuts. And yet the clamor for rates cuts is turning into a crescendo.

HISTORY REPEATS

Every bubble has always been caused by excessively low Interest rates, out of thin air monetary creation and easy credit. But this time around, an almost complete lack of any underwriting standards was added to the mix, thus allowing anyone and everybody to borrow any amount for any reason with no documentation required. The result was a degree of SPECULATION unheard of in the annals of investing.

RESIDENTIAL REAL ESTATE was the first and biggest bubble to burst. 1% no documentation mortgages combined with five solid years of 20% price appreciation caused a level a speculative overbuilding that will take more than TEN years to get back to some semblance of equilibrium. You can foreclose on homes and default on most of the CDO’s, CMO’s and whatever other anachronisms that there are: You can take massive write-offs and have the Government re-capitalize (Bail-out) the banks, but after all of that and whatever else you may do; the vacant homes still remain standing, flooding the market. Only time and much, much lower prices will clear the oversupply. And that my friends, is the real problem that NOBODY is talking about.

OUR GOLDILOCKS ECONOMY

Goldilocks was and is only a fairy tale. She never existed and neither did a Goldilocks economy. She has always been a Wall Street fairy tale which, in conjunction with the Governments hidden and contrived INFLATION statistics, make Disney seem like an armature when it comes to selling Fantasy..

OVERCAPACITY, thanks to our new world-wide economy, is now world-wide, with the worst case being in China. If you think that the USA and Europe can go into a mild recession while China, which has now frozen all new lending can slow down its growth to a mere 10% as it pulls the rest of the world out of recession, then you must also believe that Santa is real too and you don’t know the first thing about economics. The Piper Must Always Be Paid and China will crash and burn along with the rest of us. There is a time and a place for every thing and now is the time to take profits; China and Brazil included.

PENSION FUNDS and INSURANCE COMPANIES: They are not immune to the now Junk (alias AAA) Bond defaults. So far, nobody has noticed because they are not on margin and they do not have to mark to the market on a daily basis. But with the Baby Boomers getting ready to retire, what will happen when they begin having to start paying benefits?

KILLING THE GOOSE THAT LAYS THE GOLDEN EGGS Most of the world is moving to some form of Capitalism, for the simple reason that Capitalism is the only system that creates wealth. However, all of our politicians since FDR, have their Heads up their A-- and are moving slowly but steadily towards Socialism. And in the name of Environmentalism and Global Warming, they have, in their ultimate wisdom, put 85% of the USA ( containing the world’s biggest un-tapped oil reserves) off limits to drilling, thus funding all of our Enemies ( IRAN, RUSSIA, VENESWELA etc.) and jeopardizing our national security while guaranteeing that our coming Recession turns into a Depression. While the world around us cuts taxes, our Congress and presidential hopefuls are busy figuring out new ways of taxing the most productive aspects of our society. What can you expect when the two richest men in the world, who have made all their money under a capitalist system, are Socialists both in their hearts and in their minds?

Do you all not realize that on the day we would announce the permitting of drilling in Anwar and off shore Florida and California, oil would drop to $50 a barrel overnight and be back below $25 a barrel within five years. What effect do you think that would have on the war in Iraq, on Iran’s nuclear ambitions and Russia’s new found power and intransigence?

NOTE: There is not an economist, analyst or politician on the planet that even if they knew anything, has the integrity to tell us the truth, especially if they still want to keep their jobs. It is much easier to go along with the know nothing media journalists cum analysts and pseudo-economists who are clamoring for just a few more interest rate cuts that will solve all. After all, they all know more than the Fed Chairman, don’t they? Just ask them.

HOPE VS REALITY

I am always amazed at the degree to which people only hear and see what they want to, completely ignoring the facts as they drive their investment vehicles, looking only through their rear view mirrors. Have you also noticed that the flood of new analysts and journalists on both the financial channels and at the Wall St. Journal are all getting younger and younger and more enthusiastic? None of them have ever even heard of a Bear Market, let alone seen one.

INFLATION

Inflation has by definition always been a monetary phenomenon. The money supply has been growing at a compound 10% rate of growth above the GDP rate of growth for going on 15 years and we still only have core inflation of 2%? That’s even a bigger lie than the world’s proverbial biggest lies. In cleaning out my files, I came across my 1999 income tax return and so I compared my expenses to my 2006 return and discovered that they have been increasing at a 10% compounded annual rate of growth. That, my friends, is called Inflation.

GDP RATE OF GROWTH

If GDP grew at a 3.9% in the third quarter, with core inflation reported being 2.5% and the PPI at 3.5%, what would be the real GDP rate of growth be if true inflation is at 10%? Also, what would the real income rate of growth be at a 10% inflation rate? When the French and German Governments project 1% growth for 2008, what do you believe they really think and expect?

CREDIT CRUNCH

As far as the credit crunch is concerned, I repeat: you ain’t seen nothing yet. I CAN GO ON, BUT IF YOU HAVE NOT GOT THE POINT BY NOW, YOU NEVER WILL.

WHERE TO NOW

Nothing has changed. We are on track to what I have been calling for the last three months or so: A retest of the August lows followed by a Santa Clause year end break-out rally to new highs (at least on the DJII). This would be the kind of action that would generate both a Divergence and the kind of Sentiment figures that would set the stage for a BULL TRAP to end all traps and trigger the kind of Bear Market that would rival the 1973-74 and if we are not ultra careful, the 1929 – 32 Bear Markets. Do not try to play for this maybe year-end rally. Keep your powder dry and wait for you opportunities to go short. For those among you who think that you are good enough to play both ends against the middle, all I have to say to you is GOOD LUCK.

GOLD

We getting our 5% pull back that we have all been hoping for. Will you all once again looking a gift horse in the mouth? Have you increased your positions and/ or begun scaling in? The world is finally beginning to realize the true value of the US dollar and it won’t be long before they begin to distrust all fiat paper currency. What do you think will happen to gold once this realization sets in? We have only entered the middle of the third wave up, with my initial target for this move being in the $1,300 per oz area. My long term projections are in the $5,000 plus Zone . NEED I SAY MORE? Can I make myself any clearer? BUY GOLD.

GOOD LUCK AND GOD BLESS


AUBIE BALTIN CFA. CTA. CFP. PhD.
Palm Beach Gardens, FL.
aubiebat@yahoo.com
561-840-9767

The above information has been gleaned from information that I believe to be reliable but is not guaranteed by me. The information provided is strictly for educational purposes only and is not meant to be treated as investment advice.

Source 1: http://www.ozcopper.com/index.php?a=2&b=201
Source 2: http://www.fiendbear.com/RECESSION.html

read it via : http://forums.vr-zone.com/showthread.php?t=219990

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the beauty of predicting a bear is that you will never go wrong. Just put this essay in any era or year.

sooner or later there will be a bear.

*Gollum








Good luck.

[wyv9]

INteresting...

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via : http://sg.news.yahoo.com/afp/20080104/tts-us-economy-unemployment-972e412.html

WASHINGTON (AFP) - - The US economy succumbed to housing and credit troubles in December as just 18,000 jobs were added and the unemployment rate rose to 5.0 percent, data showed Friday, highlighting fears of recession.
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Private-sector employment shrank in the month for the first time since 2003, with the report barely positive on a gain in government jobs, according to the Labor Department's nonfarm payrolls report.

The survey, seen as one of the best indicators of economic momentum, showed a sharp decrease from November, which had job gains of 115,000, revised up from an initial estimate of 94,000.

The overall unemployment rate rose from 4.7 percent in November.

The report showed the smallest number of jobs created since August 2003 and the highest unemployment rate since November 2005, in the wake of Hurricane Katrina. Analysts had expected on average a gain of 70,000 jobs and a jobless rate of 4.8 percent.

The report is the "strongest evidence so far that the economic expansion is grinding to a halt," said Peter Morici, an economist at the University of Maryland.

"The Federal Reserve will aggressively cut interest rates to combat the US slowdown. However, these efforts may prove insufficient to head off a difficult recession."

The report came amid an intense debate among analysts on whether the US economy was headed for recession as a result of the meltdown in housing and its impact on the finance sector, which has led to a credit squeeze.

"This does suggest things are weak," said Scott Brown, chief economist at brokerage firm Raymond James.

Brown said the report suggests a slowdown in economic growth to around 1.0 to 1.5 percent in the fourth quarter but not yet a contraction.

"You're still looking at positive job growth overall. You're getting closer to a recession (but) I still think we'll see better growth" in the coming months.

Brown said the weakness "is concentrated in manufacturing and construction and it's still a question as to whether the housing weakness will drag the overall economy down."

Robert Brusca at FAO Economics said the decline in private-sector jobs is especially troubling.

Brusca said the Fed, which has already cut short-term rates by a full percentage point since September, may have to do more to stimulate a flagging economy.

"Look for more aggressive Fed rate cuts," he said.

"When unemployment rises by more than 0.5 percentage points from its cycle low a recession generally ensues. The economy has now performed that trick."

Stephen Gallagher, economist at Societe Generale in New York, said the report ends a streak of relatively healthy job growth that had cushioned the economy against the impact of credit and housing troubles.

Gallagher said the economy could be headed for trouble if the problems in several sectors dent consumer spending, which accounts for two-thirds of gross domestic product.

"Up to this report, employment gains have been seen as sufficient to support the consumer," Gallagher said. "This report raises threats."

December's gain was far below the 111,000 average monthly rise in 2007 and just a fraction of the more than 100,000 estimate of the number of new jobs the economy needs to keep up with new entrants to the workforce.

Service sector jobs increased 93,000 jobs, while government jobs increased by 31,000.

But these gains were offset by steep losses in the goods producing sectors. Construction employment declined by 49,000, while factory jobs fell 31,000.

While the overall service sector gained jobs, the retail sector fell by 24,300.

Average hourly wages rose 0.4 percent in December to 17.71 dollars, suggesting wage-based inflation pressures remain. Average hourly earnings have increased 3.7 percent in 2007.

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via : http://forums.hardwarezone.com.sg/showthread.php?t=1841304

Wall Street Plunges As Weak Economic, Earnings Figures Stir More Concerns About Recession
NEW YORK (AP) -- A growing conviction that the U.S. is headed toward recession sent Wall Street plunging Tuesday, with weak retail sales figures and disappointing results from Citigroup Inc. exacerbating investors' pessimistic mood. The Dow Jones industrials tumbled nearly 280 points.

Investors backed away from stocks amid growing concerns that consumer spending will wane and contribute to an economic downturn. The latest evidence that consumers are retrenching came from the Commerce Department, which said retail sales fell in December while it also revised its November figures lower. Spending by consumers, which accounts for more than two-thirds of U.S. economic activity, has been key to staving off economic slowdowns in recent years.

There is also a growing fear that the Federal Reserve hasn't done enough to keep the economy going -- especially as investors continue to see the fallout from the summer's subprime mortgage crisis. Citigroup, the nation's biggest bank, announced on Tuesday a hefty $18.1 billion write-down for bad mortgage assets and slashed its dividend.
Fourth-quarter earnings reports aren't helping matters. After the close of the market Tuesday, Intel Corp.,the world's largest chip maker, posted results below projections; the company is seen as a leading indicator for the rest of the tech sector, and other companies as well.

Brian Gendreau, investment strategist for ING Investment Management, said the market is now seeing "a decisive shift" toward a recession.
"The sectors that are outperforming are defensive plays, like consumer staples," he said. "People don't buy them unless you're worried about sustained weakness."
Investors have sold stocks sharply lower so far this year on increasing worries about the economy. The Dow fell 277.04, or 2.17 percent, to 12,501.11, the latest in a string of triple-digit slides.

Broader stock indicators also lost ground. The Standard & Poor's 500 index dropped 35.30, or 2.49 percent, to 1,380.95, and the Nasadaq composite index lost 60.71, or 2.45 percent, closing at 2,417.59.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 4.42 billion shares, compared to 3.51 billion on Monday.
Bond prices rose as investors fled to the safety of government securities. The yield on the benchmark 10-year Treasury note -- which moves opposite its price -- fell to 3.68 percent, close to its lowest point since March 2004 and down from 3.77 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell $2.30 to settle at $91.90 per barrel on the New York Mercantile Exchange.

Tuesday's trading more than wiped out Monday's triple-digit gain in the Dow, and showed the depths of the market's pessimism. Both the Dow and S&P 500 are almost 12 percent below their early October highs, while the Nasdaq is off nearly 15 percent from its high on October 31.

A 10 percent drop from a market high is considered a correction.
Just 10 trading days into 2008, the Dow has fallen 5.76 percent, while the S&P 500 is down 5.95 percent and the Nasdaq has lost 8.85 percent.
"When consumers are beaten over the head about how bad things are, pretty soon they believe it and that affects their spending habits," said Scott Wren, equity strategist for A.G. Edwards & Sons. "And when there's a lot of uncertainty out there, the Fed needs to be a little more aggressive -- I think they need to cut more than just at this next meeting."
Still, hopes for a rate cut weren't enough to calm Wall Street.
He said the worrisome fall in retail sales, which also pressures the dollar, builds a case that the cut will be at least 0.50 percentage point. It also increases the likelihood of further cuts after the central bank's Jan. 29-30 meeting.

Adding to investors' concerns, the New York Federal Reserve's Empire State survey of regional manufacturing showed a drop to 9.03 this month from 9.80 in December.
But there was some relief about inflation. Producer prices fell 0.1 percent, according to the Labor Department. The result was smaller than the 0.2 percent drop expected by economists, but all declines in price pressure are generally good news. Excluding food and energy, producer prices gained 0.2 percent, matching expectations.
Financial services stocks were among the biggest influences on investors during Tuesday's session. Citigroup's drastic efforts to shore up its balance sheet had been widely expected, but it still was a forceful reminder of the serious problems that bad lending practices have created for financial services firms.

Citigroup, which lost $9.83 billion in the fourth quarter, also announced a massive $12.5 billion capital injection. Hope that struggling banks will bolster their finances was also stirred after Merrill Lynch & Co. Inc. said three foreign investment funds agreed to invest $6.6 billion.

Citi fell $2.21, or 7.6 percent, to $26.85. Merrill -- which reports results on Thursday -- fell $2.96, or 5.3 percent, to $53.01.

Intel plunged in after-hours trading after also saying sales in the current period would come in slight below expectations. The stock, which closed at $22.69, down 39 cents, in regular
trading, skidded to $19.84 in later dealings.

The Russell 2000 index of smaller companies fell 15.05, or 2.11 percent, to 697.43.
Overseas, Japan's Nikkei stock average fell 0.98 percent. Britain's FTSE 100 closed down 3.06 percent, Germany's DAX index fell 2.14 percent, and France's CAC-40 lost 2.83 percent.

New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com

(This version CORRECTS 'Nasdaq' being down 15 percent sted 'S&P 500' and CLARIFIES dates in 12th graf.)

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and via : http://forums.hardwarezone.com.sg/showthread.php?t=1841087

‏
Citigroup Sinks Market

Dow -277.04 at 12501.11, Nasdaq -60.71 at 2417.59, S&P -35.30 at 1380.95

    [BRIEFING.COM] It didn't take long for Monday's rally to be unwound as a dismal fourth quarter report from Citigroup (C 26.94, -2.12) and a weaker than expected retail sales report for December triggered a host of sell orders that led to material losses for the major indices.


    As far as Citigroup is concerned, it reported a large write-down as expected - $18.1 billion to be exact - yet some critics felt that write-down still wasn't large enough to serve as an inflection point that suggested the worst is over for the investment bank.
    Altogether Citigroup reported a net loss of $9.83 billion, or $1.99 per share, on a 70% decline in revenues. Analysts had expected the company to record a loss of $1.03 per share.


    In addition to posting its operating results, Citigroup said it slashed its dividend by 41% to $0.32 per share and that it raised $12.5 billion in new capital from outside investors that include Saudi Prince Alwaleed bin Talal and former CEO Sanford Weill's family foundation.


    The market didn't find anything to cheer about in the report, which also contained the unsettling admission that credit costs for its U.S. Consumer business increased by $4.1 billion due to increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards and auto loans. This revelation triggered concern about the deteriorating state of debtors in the U.S. that weighed heavily on other banks in Tuesday's trading.


    Fellow Dow component JPMorgan Chase (JPM 39.17, -2.19), which reports before Wednesday's open, was among the hardest hit with investors cognizant that its card services business accounted for 24% of its net revenues last year and 25% of its operating income.
    Separately, Merrill Lynch (MER 53.01, -2.96) languished after announcing it raised $6.6 billion in new capital through the issuance of convertible preferred stock that carried a 9.0% coupon.


    The financial sector, which dropped 3.7%, led Tuesday's retreat that saw the indices close near their lows for the day. The energy sector, which fell 3.5%, the materials sector, which shed 3.0%, and the technology sector, which lost 2.4%, were the other big laggards as slowdown concerns permeated the market.
    Every economic sector, in fact, closed the session with a loss that exceeded 1.0%. In turn, there wasn't a single stock in the Dow that closed higher.


    A report from the Dept. of Commerce that total retail sales and retail sales, excluding autos, declined 0.4% in December contributed to the slowdown concerns. Economists had forecast a flat reading for retail sales and a 0.1% decline excluding autos.
    The December weakness followed an otherwise robust November when retail sales increased 1.0%, so the December data wasn't as bad as it was made out to be. Nonetheless, a number that was off the mark, combined with a fourth quarter earnings warning from Williams-Sonoma (WSM 20.01, -2.19), exacerbated the negative sentiment that was rooted in large part in Citigroup's woeful report.


    In typical fashion, the Treasury market advanced in the face of the stock market's weakness. Gains were registered across the yield curve with the strongest performance at the back end. The benchmark 10-year note jumped 22 ticks and its yield fell to 3.68%.

    ..Nasdaq 100 -2.8%. ..S&P Midcap 400 -2.4%. ..Russell 2000 -2.1%.

[zuoom]

just read that the world "RECESSION" is no longer considered taboo.

and just realised that the forum has gotten very quiet. due to the sub 2800 STI figures?

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SINGAPORE - A SINGAPORE state investment fund that bought multi-billion dollar stakes in beleaguered banks Citigroup and UBS said a global financial crisis and recession was increasingly likely but that its investments in western banks were long-term in nature.

'The financial contagion has now spread beyond US shores, increasing the likelihood of a global financial crisis and recession,' Government of Singapore Investment Corp deputy chairman Tony Tan told a staff meeting on Monday.

'We could be facing a recession which is longer, deeper and wider than any recession we have encountered in the last 30 years.'

'We regard our investments in UBS and Citigroup as long term investments which will give us good returns when markets stabilise and economic conditions return to more normal levels,' he said.

GIC is the larger of Singapore's two sovereign wealth funds and bought 11 billion Swiss francs (S$15 billion) worth of mandatory convertible notes in UBS last December. In January, GIC invested US$6.88 billion (S$9.4 billion) in Citigroup in a capital raising by the US bank.

'We regard our investments in UBS and Citigroup as longterm investments which will give us good returns when marketsstabilise and economic conditions return to more normallevels,' he said.

GIC previously said it has not yet decided whether to participate in UBS's subsequent 15 billion franc rights issue. Dr Tan said that GIC had entered the market turmoil well prepared after it had taken a more conservative stance in its investment portfolio by selling stocks in the third quarter and holding more cash.

'We are now entering a period of extreme uncertainty in the world economy and the global financial markets. As banks continue to de-leverage, cutting down on their lending activities and causing contraction in credit supply, the prospects for the US economy and even the world economy are fraught with considerable downside risks,' he said.

GIC says it manages 'well above US$100 billion'. But analysts say the fund's assets could be larger than US$300 billion, making it one of the world's biggest sovereign wealth funds.

Morgan Stanley said in February that GIC was the world's third-largest sovereign wealth fund with US$330 billion in assets under management, behind the Abu Dhabi Investment Authority with US$875 billion and Norway's Government Pension Fund with US$380 billion.

Temasek Holdings, Singapore's other fund, has to date invested US$5 billion in Merrill Lynch. -- REUTERS

via :http://www.straitstimes.com/Latest%2BNews/Money/STIStory_229544.html

[Vorsprung durch Technik]

only time will tell whether all these investments are wise or not

end of the day, small flies like me, only worry that day-to-day got $$$ to spend or not

[Cobra]

It is during times like Recession that Real Successful Businessmen and Gurus surface .

I guess there's a few very positive individuals out there who really know how to see Opportunities in Disasters.

How about you ? 

[Vorsprung durch Technik]

use the cheapest commodities and convert it into niche product. donuts, coffee buns are typical examples

[Spyder]

It is during times like Recession that Real Successful Businessmen and Gurus surface .

I guess there's a few very positive individuals out there who really know how to see Opportunities in Disasters.

How about you ? 

Yup. You're absolutely right about that. These are the people who knows how to take advantage of the situation admist the dark times. So when the skies clear, those who jump at the opportunities then will reap the rewards and get richer.

[zuoom]

The just-ended PC show garnered a total of $51.7 million in sales revenue, almost doubling those of last year's $26.2 million. -myp



PC show takings exceed expectations
 
DESPITE worries over a slowing economy this year, the PC show which ended on Sunday surpassed the organiser's expectations.

The show garnered a total of $51.7 million in sales revenue, almost doubling those of last year's $26.2 million.

The event also drew more than 1.1 million visitors, soundly hitting the target of more than a million visitors set by organisers, Lines Exposition and Management Services.

Ms Gillian Loh, project manager of the show's organisers, said on Sunday: "The carpark was full two hours before the show even began."

In total, this year's exhibition was spread over a whopping 30,000 sq m - approximately the size of five football fields - of exhibition space to accommodate more than 600 exhibitors this year.

There was positive feedback from exhibitors, said the organisers.

Mr Andrew Koh, 42, director and general manager of consumer imaging and information division for Canon Singapore, said: "We had a 20 per cent increase in sales generated as compared to 2007, and we look forward to participating in the show again next year."

Ms Loh added: "A number of exhibitors sold out their products before the show ended and many have expressed intention to re-book by the third day."

Mr Martin Quek, 52, a businessman, said: "This year's show is much better, probably due to the increase in space."
 
Source: http://www.asiaone.com/Digital/News/Story/A1Story20080617-71231.html

via : http://forums.vr-zone.com/showthread.php?t=289852

[Cobra]

Think the location also place a big part for the success ... EXPO is really not a place to have mega shows like PC shows (it needs more carpk space and a shopping mall next to it)

[zuoom]

Posted: 01 July 2008 2352 hrs

COPENHAGEN: Denmark has fallen into recession, the first European Union country to do so in the aftermath of the US sub-prime crisis, after its economy contracted in the first quarter, official figures showed on Tuesday.

The official statistics office said the Danish economy contracted 0.6 percent compared with the three months to December, when it saw negative growth of 0.2 percent.

A recession is defined technically as two consecutive quarters of negative growth.

The statistics office said household consumption fell 1.1 percent in the first quarter, led by a 4.4 percent drop in new car sales.

Denmark is a member of the European Union but has not adopted the single european currency, the euro.

It is one of the 30 countries in the Organisation of Economic Cooperation and Development, which groups the world's richest economies.

Global growth has been steadily slowing since the collapse of the US sub-prime or higher-risk home loan market last year sparked a credit crunch that has seen business starved of funding as banks refuse to lend.

At the same time, record high oil and other commodity prices have stoked costs and inflation, undercutting corporate profits and investment. - AFP/de

http://www.channelnewsasia.com/stori...357637/1/.html

via : http://forums.hardwarezone.com.sg/showthread.php?t=2014093

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http://money.newsmax.com/streettalk/recession/2008/07/23/115423.html?s=al&promo_code=66B1-1

Roubini: 'Worst' Recession in Decades Ahead

Wednesday, July 23, 2008 8:30 AM

   Article Font Size 

The U.S. is in for the "worst" recession in decades, one that may well be more severe than the downturn that followed the stock market bubble in 2001 and the savings and loan crisis of 1991, says Nouriel Roubini, former Clinton White House economist.

In an interview with Bloomberg, Roubini, now a university professor, says the recession will be a result of a downturn in consumer spending.

Roubini says the remarkable rally of financial stocks when better than expected results from Wells Fargo, JPMorgan, and Citi soothed the fears that major financial institutions were in even more distress than market analysts predicted "is just another temporary bear market rally that will fizzle away once the onslaught of bad financial and macro news builds up again."

The condition of financial firms and banks are much worse than the news suggests. When the additional bad news comes out, the U.S. will experience a systemic financial crisis, he says.

Here's why Roubini thinks that is likely, if not probable:

"Since residential investment is only 5 percent of even a worsening housing market, recession cannot – by itself – trigger an economy-wide recession," said Roubini. "Rather, since private consumption is over 70 percent of aggregate demand, a sharp and persistent slowdown in consumption growth — below 1 percent or even negative — is necessary to trigger a full-blown recession."

Roubini says that evidence is mounting that debt-burdened consumers may have reached the tipping point, as energy and food costs soar.

"A sharp slowdown in consumption growth will be the last straw that will trigger an economy-wide recession," he says.

© 2008 Newsmax. All rights reserved.