Gary Shilling: You Bet The Economy’s Crappy–And It’s Going To Stay That Way

From TechTicker, via Henry Blodget:

From fears of economic Armageddon just a year ago, to expectations of a V-shaped recovery just a few months ago, the U.S. economy now sits at an uneasy crossroads.

But other than the perception of the economy’s strength, not much has really changed, according to Gary Shilling of A. Gary Shilling & Co.

It’s much easier to declare the recovery “robust” when stocks rally the way they did from March 2009 to April 2010, Shilling tells Henry in the accompanying clip. But the recent troubles in Europe and the subsequent downward shift in the market have changed the perception of what the recovery will be.

But Andre Agassi was wrong: perception isn’t everything.

Shilling says this is, and always has been, a long, slow recovery, with the possibility of a double-dip recession.

After decades of ratcheting up the debt-to-income ratio, first by the U.S. Government in the 1970’s, then by U.S. consumers in the 1980’s, we are now entering a period of deleveraging, which will be a drag on the recovery, and possibly bring some major hiccups along the way.

Don’t be too scared of a meltdown, but don’t expect a return to the era of negative savings rates and maxed out credit cards anytime soon.

Shilling also says the slow recovery and a continuation of high unemployment could bring us into an extended period of no-growth, similar to the “slow-motion train wreck” that has characterized the Japanese economy for the past 20 years.

But we’re in better shape, he says, suggesting our good old-fashioned American optimism (and a return to high-savings rates) will serve us well, and help us avoid such economic purgatory.

Tags: Economy, Gary Shilling

Read more: http://www.businessinsider.com/gary-shilling-you-bet-the-economys-crappy-and-its-going-to-stay-that-way-2010-6#ixzz0rPAcSf7E