Rosenberg on the Economic Crisis, Part 1

By Eric Jackson10/14/10 - 12:10 PM EDT

NEW YORK (TheStreet) -- Economic and market bears don't get more notable than David Rosenberg, the chief economist and strategist at Canadian investment firm Gluskin Sheff.

Rosenberg generated headlines this August when he advised clients that the "current economic malaise" is a "depression," and not "some garden-variety recession."

The former Merrill Lynch chief economist also was ahead of the pack when he raised alarms about the housing bubble in 2005 and warned of a coming recession in 2007.

Rosenberg remains pessimistic about the economy and contends that home prices could decline another 10% before they hit bottom, as you'll read in the following multipart interview I conducted with him.

You might be surprised, however, to learn that Rosenberg was an unabashed bull earlier in his career, that he believes a Keynesian approach can save the economy if done correctly, that he thinks the U.S. needs a jobs czar and that he sees the dollar rallying soon.

He's predicting gold prices will hit $3,000 an ounce in the next two years and believes a potential currency war is the biggest threat to the global economy right now.

He addressed all these topics and more when he recently sat down with me for the following wide-ranging interview.

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Eric Jackson: When was the last time you were bullish?

Rosenberg: 2000. Most people know me as a permabear. I'm not. I was bullish on equities in the '80s when I was a senior economist at Bank of Nova Scotia(BNS_) and nobody cared what I thought. Then in the '90s, I was also bullish when I worked with Sherry Cooper at Bank of Montreal(BMO_) and helped [with] her book Riding the Wave about the Internet boom. It was only when I started working at Merrill Lynch in 2000 and I saw the onset of the tech wreck that I turned bearish.

In the past 10 years, I've had different shades of bearishness. This has been the time when I've gotten notoriety, so people only associate me with bearish views. I certainly have been overall underweight equities in my recommendations. I missed two very significant peaks and two significant troughs. The reality is that nobody ever got hurt from my picks.

When did you first start to get ultrabearish about what you were seeing in the U.S.?

Since the dot-com bubble we've had a series of bubbles and policy reflation, combating recurrent market deflation, which has produced all this instability. There's no question there have been massive swings along the way. I have a nasty tendency to be early to a fault. I started getting concerned about the housing bubble in 2005 and very bearish on the economic outlook in 2007.

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