'Dr. Doom' Calls U.S. Economy Worst Since WWII

Dr. Henry Kaufman i i

Dr. Henry Kaufman, also known as "Dr. Doom," says the U.S. economy is in the "worst recession in the post-World War II period." Art Silverman/NPR hide caption

itoggle caption Art Silverman/NPR
Dr. Henry Kaufman

Dr. Henry Kaufman, also known as "Dr. Doom," says the U.S. economy is in the "worst recession in the post-World War II period."

Art Silverman/NPR

When Alan Greenspan was chairman of the Federal Reserve and addressed Wall Street economists, he could always count on a question from Henry Kaufman.

So could former Fed Chairman Paul Volcker; and nowadays, so can the current chairman, Ben Bernanke.

Kaufman is the man known as "Dr. Doom." It's a nickname — which he says he regrets — that he earned for his bearish forecasts in the 1970s, when the economy was teetering. Back then, the inflation rate was in the double digits, the prime loan rate hit 21.5 percent, and government bonds were more than 15 percent, according to Kaufman.

"We were in serious difficulty," Kaufman tells NPR's Robert Siegel. "I was very much concerned. I expressed that, rather loudly. Because I strongly feel that when there is substantial financial turmoil, there is a serious risk of ending the middle class — and that could produce major political shifts."

Although the economy turned around, Kaufman says there were few people at the time who were willing to be realistic about the danger the numbers posed.

As managing director of Salomon Brothers in the 1980s, Kaufman was an oracular figure on Wall Street.

He calls the current economic situation the "worst recession in the post-World War II period." Unemployment numbers could reach between 8 and 8.5 percent, Kaufman says, and there likely will be more bank failures. And he calls the country's increase in debt an "unsustainable path."

Despite those concerns, he says there is room for optimism.

"There are very strong fundamentals, so to speak, underpinning this country," says Kaufman, whose Jewish family fled Nazi Germany when he was a child. "Perhaps I recognize that more than others, having come here at 10 years old and still having the vestiges of a different kind of environment in my background."

He says the United States is a strong democracy, and that this country "adapts to change far more easily than most other countries around the world. We do have a big middle class. We still have the best higher educational facilities around the world. We are a country that accepts immigrants one way or the other. We still have a very strong technology sector.

"The fundamentals in the U.S. as a society — as a system — are terrific," Kaufman says. "It's just that we get in trouble from time to time, and we have to make sure that we don't create a society politically or economically that is going to hurt that big middle class."

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