The president of A. Gary Shilling & Co. said, “The major economies of the world are fairly stable, but I do see a global recession. Europe is probably already in it, and I think it will be a severe one.”
He added that Europe is in the same position now that the U.S was in 2007 and 2008.
"They’ve got a financial crisis that has spilled over into the goods and services side, or the real economy," Shilling (left), said. "The fact that they have a common monetary policy but not a common fiscal policy like we have is going to make it more difficult for them to deal with. So I think that could be very severe."
He also said there’s a question of whether or not the eurozone can be held together.
“I think Germany and the other Teutonic north countries do want to keep it together because the alternative is chaos; runs on the banks, which I think is happening to certain extent right now, but the complete collapse is sort of unthinkable. But it is expensive for the northern countries because it means continual bailouts of the south and that’s what’s going on.”
The real risk to the U.S from Europe is not so much in the goods and services sector, he said, noting that only 14% of our exports go to the eurozone. Rather, the risk is in the financial area, as 27% of U.S. foreign bank exposure is in the eurozone.
“We’ve already seen MF Global bite the dust, so there’s probably more risk there,” Shilling concluded. “The consensus is a mild recession. I think it will be very severe.”