David Rosenberg, the perma-bear economist whose pessimistic outlooks generally align with those of his fellow Cassandra, Nouriel Roubini, has caused “a mini sensation” in financial circles this week, expressing uncharacteristic optimism about the direction of the US economy. As the Wall Street Journal reports, Rosenberg, who explained his thinking in a newsletter titled “Parting of the Clouds,” sees the votes last week in Wisconsin—where public-sector union-buster Scott Walker defeated a recall attempt by a landslide—and liberal California, where voters in San Jose elected to cut benefits for public workers and where the population of San Diego voted to freeze wages and mandate private-sector style retirement plans for city workers, as a historical “inflection point” that give him reason to believe that the next 15 years won’t be like the past 15.Rosenberg believes Americans are starting to wake up to the unsustainability of the blue model—with its attendant public-sector union problems and oncoming tidal wave of pension liabilities for cities across America—and are beginning to making this felt at the polls. He writes:
I may be cautious on the outlook for risk assets and cyclical securities over the near- and intermediate term. But change is always at the margin. And it usually starts in the political sphere. Within that realm, it is the local levels that tend to lead reforms at the national level. And that we could see the pension reforms take hold in California of all states — hey, isn’t that our “Greece”? — is a real bellwether.
For Rosenberg, the future is brighter than many think. Rosenberg expects the change in attitude that is taking hold at local levels across the country in cities like Chicago and San Diego and states like New York and Wisconsin and California, to filter up to the top.The loudest voices today are those of the hand wringers. It’s comforting to hear some people out there who think that there is a light at the end of the tunnel and that this light comes from the Americans who are demanding better economic results, new ways of doing things, and a better future for the 80 million Millennials who, absent some badly needed changes and reforms, are going to be struggling with some ugly debts and social problems in the decades to come.