A Gary Shilling: we're already in a recession – but the future is bright

A Gary Shilling, president,A Gary Shilling & Co

"I think we're probably already in a recession." In his 2010 book, The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation, author and strategist A Gary Shilling correctly forecast a long stagnation following the 2008 crisis. Now, he tells Ed Harrison on Real Vision, "there's just a whole host of economic indicators that are declining."

That said, we're not facing anything to compare to previous "really outstanding crises". There are lots of potential problems around: "corporate borrowing has been very heavy" in the US; and over-indebted emerging markets could also struggle given the strength of the US dollar, which "makes it much more expensive in terms of local currencies to pay for those dollar debts." Finally, there are trade wars with China. Yet while any of these issues "might blow up", says Shilling, "I don't see those as big bubbles."

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How will that affect markets? Yields on US Treasuries (government debt) will fall even further (and thus the price of bonds go even higher), says Shilling. He reckons the ten-year Treasury yield will fall as far as 1%. Also, it'll make the 2020 election "very interesting", because "when times are bad, any incumbent is at risk."

However, Shilling is more upbeat in the long run. Advances in technology mean "we probably are going to see tremendous productivity growth in the future." Coupled with low inflation, that could see "real GDP grow 2.5%, 3%... So, I think it could be a pretty bright future there."