Goldman Sachs' chief US economist, Jan Hatzius, can articulate my own view of the economy better than I can, so I will just repeat what he said yesterday.
The boost the economy received from an inventory rebuild is now over, and the best we can expect is an anemic H2 GDP growth rate of only 1.5%.
If you want to see what this looks like up close and personal, take a look at the chart below of intermodal rail traffic, which shows the economy definitely taking a turn for the worse.
The private sector ran enormous deficits from the early nineties to 2007, which have only just started to unwind. Debt/GDP, debt/income, and debt service are all still at historical highs.
In the last three years, the private sector has flipped from spending 4% of GDP to saving 7%, a massive deflationary swing.
The net effect of this sobering scenario is to keep unemployment stuck around 10% and interest rates at bargain basement levels until 2012.
But Jan doesn't see a double dip occurring without a major shock. BP and the crisis in Europe aren't big enough to do it alone. The bottom line: a "U" or "bathtub" shaped recovery in dire need of more government stimulus. This has been my own forecast for the economy since the beginning of the year.
Hint: this is not good for stocks or assets anywhere. I'm sure Ben Bernanke is listening.
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By. Mad Hedge Fund Trader
