In 2007 Nouriel Roubini was right about the soap bubble in the U.S. housing market and its impact on the global economy. Mr. Roubini keeps warning the world about the continuing consequences of the global economic crisis while ignoring the results of the Fed Reserve’s QE1 and QE2.
Now the U.S. economic recovery has slowed down. It is considered a return to the post-crisis tendencies rather than economic recession. Nouriel Roubini expresses his own opinion on the matter once again. On June 21st he published another article called “That Stalling Feeling” at www.project-syndicate.org.
In his article Nouriel Roubini underlined that “Despite the series of low-probability, high-impact events that have hit the global economy in 2011, financial markets continued to rise happily until a month or so ago… Until recently, markets seemed to discount these shocks; apart from a few days when panic about Japan or the Middle East caused a correction, they continued their upward march. But, since the end of April, a more persistent correction in global equity markets has set in, driven by worries that economic growth in the United States and worldwide may be slowing sharply… Data from the US, the United Kingdom, the periphery of the eurozone, Japan, and even emerging-market economies is signaling that part of the global economy – especially advanced economies – may be stalling, if not dropping into a double-dip recession… there are good reasons to believe that we are experiencing a more persistent slump”.
Nouriel Roubini names 3 major reasons:
1. “…the problems of the eurozone periphery are in some cases problems of actual insolvency, not illiquidity: large and rising public and private deficits and debt; damaged financial systems that need to be cleaned up and recapitalized; massive loss of competitiveness; lack of economic growth; and rising unemployment. It is no longer possible to deny that public and/or private debts in Greece, Ireland, and Portugal will need to be restructured”.
2. “…the factors slowing US growth are chronic. These include slow but persistent private and public-sector deleveraging; rising oil prices; weak job creation; another downturn in the housing market; severe fiscal problems at the state and local level; and an unsustainable deficit and debt burden at the federal level”.
3. “…economic growth has been flat on average in the UK over the last couple of quarters, with front-loaded fiscal austerity coming at a time when rising inflation is preventing the Bank of England from easing monetary policy. Indeed, inflation may even force the Bank to raise interest rates by the fall. And Japan is already slipping back into recession because of the earthquake”.
Mr. Roubini noticed that the mentioned economies “were already growing anemically and below trend”. In addition to the succession of events the countries with developed economies have seen this year, most of these countries have already been or will be deprived of “monetary and fiscal stimulus”.
And finally, Nouriel Roubini warns:
“If the latest global economic data reflect something more serious than a hiccup, and markets and economies continue to slow, policymakers could well find themselves empty-handed. If that happens, the risk of stall speed or an outright double-dip recession would rise sharply in many advanced economies.”
Market Leader and offer you to discuss Nouriel Roubini’s article. Please, visit the Academy’s Forum for traders and investors and answer the following question:
Do you share Nouriel Roubini’s opinion on the probability of another major crisis?
· Yes, I do. The 2nd wave of the global crisis is inevitable.
· Another crisis will probably break out if the world’s economic powers do not take timely and effective steps to prevent it.
· No, I don’t. Another major crisis is hardly probable in the near future.
