Global recession could last until 2010

NEW DELHI, India — The American professor nicknamed “Dr. Doom” for forecasting the financial crisis has said the global recession will last all of this year and probably next, India’s Mail Today reported Saturday.

New York University professor Nouriel Roubini said that in the best-case scenario, the recession will continue through 2010 in advanced economies while job losses will persist for an additional year, the paper reported.

He said world governments are falling behind the curve in tackling the crisis with “policymakers moving in the right direction — but (doing) too little too late.”

Speaking at a New Delhi conference, Roubini warned that the United States, Europe, and Japan must “get their act together” to avoid the global economy sinking further.

“People were hoping it would be a V-shaped recession — a sharp fall, followed by an equally quick recovery,” he said.

“But we are in the middle of an ugly U-shaped recession,” he said Friday.

Roubini said the bottom of the ‘U’ — the length of time the world economy will continue to contract — would last a minimum of three years starting from December 2007.

But he said there was a “one-in-three chance” that recession would turn into an ‘L’ — a prolonged period of stagnation or shrinking output, coupled with falling prices as demand dries up.

As early as 2005, Roubini said United States home prices were riding a speculative wave that would soon sink the economy, but was dismissed as a doomsayer.

In Delhi, he said the problems of the financial system and financial institutions were getting worse, but that the outlook could be improved by governments taking charge of insolvent banks, cleaning them up, and then selling them to private investors.

“People say when the US sneezes, the rest of the world catches cold. In this case, the US is just not sneezing, it has a severe case of chronic pneumonia.”

“We all sink or swim together,” he said, adding there is no way policy action in emerging economic giants India and China can pull the global economy out of the slump.