I hate this phrase, but are you predicting a double-dip recession?
I think that what could happen, Tom, is that we have a classic 2002-style growth relapse. There was lots of excitement going into early 2002. We had the inventory contribution. We had all the stimulus coming out of the terrorist tragedies. We built up from a dramatic oversold situation in the stock market. The Nasdaq was up 40 percent from the lows in the opening months of 2002. And look what happened. Real final sales never followed through. And although you didn't have a classic double dip, we had a substantial growth relapse.
Do we have a sustainable real economy now?
If you take a look at some measures like corporate profits, we get a very sharp V-shaped recovery in some sense. But ultimately sustainability is going to come from the demand side. And we are really in uncharted waters here when you review all the postwar data. We are in a secular credit contraction after decades of being in a secular expansion, not just of credit, but also of baby-boomer balance sheets.
Are we going to see a tempering in commodity inflation?
Well, one of the best interim leading indicators of commodities is the Chinese stock market. It's down almost 30 percent from the peak, and it has got about a three- to six-month lead on the commodity complex. So I do expect that in the next several months commodities will pull back.
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