Talk with David Rosenberg

I recently had the pleasure of talking with David Rosenberg, chief economist at Gluskin and Sheff and we talked about some of his impressions on the economics behind several of the songs on Recession Sessions .

Greenspan’s Defense
Rosenberg is no defender of the Maestro, and gave the legendary Central Banker a very poor grade. He also made clear to differentiate between the easy money policies of Greenspan and Bernanke. Rosenberg told me, “If you Gave Bernanke an economy that was growing at 5% – he certainly would not have kept rates that low for so long.” Rosenberg feeling was that at least Bernanke can pin his ultra-loose monetary policy on a weak economy, whereas, Greenspan had no such excuse.

This Time Around (Song about the Canadian Economy)
Rosenberg is still fairly bullish on the Canadian economy. Canadian banks have strong balance sheets, the fiscal situation is relatively better than other developed countries and the Canadian economy benefits from a recent strengthening in commodity prices. That being said, he doesn’t think that the Canadian fiscal situation is very solid either. He used the expression, “in the land of the blind, the one-eyed man is king” to sum up Canada’s fiscal situation. He understands the American economy to be 20 years behind the Canadian economy right now in terms of dealing with a serious fiscal situation.

Gold Price Factors
There was a story a month ago when George Soros sold most of his gold holdings that gold could be in a bubble.
Rosenberg’s opinion was that Gold is not even experiencing a mania let alone a bubble. He said that if you normalize the price of gold by the money supply that you don’t have a bubble at all. A bubble would start to emerge at around 3000 dollars an ounce.
He says, that gold is trading more like a currency now and less like a commodity.

Is it over yet?
Is it over yet was Rosenberg’s favourite song on the album.
His answer to the question was a resounding NO.
The global economy still faces major risks. The biggest of which are the European Debt crisis, the Japanese economy and the US economy which also faces major headwinds. However, he was not completely gloomy about the US. He added to his claim that, “The United States has immense wealth and they have a knack for getting their act together.”

Let’s hope they can do it again this time before the August 3rd deadline to raise the debt limit.

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