Dr. Realist (f/k/a Doom) Talks Double Dip With The FT
Roubini's latest media appearance, and now that the spectre of a double dip has fully arisen there are quite a few of them, is with the FT's James Blitz in which the NYU professor does a quick 5 minute summary of what he sees as the main threats to the US economy, among which are a 40%+ chance of a double dip, a sub 1% GDP growth in H2 2010, the disappearance of all stimulus pushes (and the conversion of the fiscal stimulus from a tailwind to a headwind), an awful job market, bigger bank losses, declining home prices, a drop in the stock market, widening spreads, a feedback loop from stock markets into the economy, and much more. We are happy the professor has revised his call from a few months back seeing virtually no chance of a double dip. As to policy, Roubini thinks the US has run out of policy bullets on both the monetary and fiscal side: he is sure the Fed will do more QE, but it will be impotent as there is already over $1 trillion in excess reserves (of course, it simply means excess reserves will be $2 trillion, $3 trillion... etc. And IF the economy picks up, this money will hit broad money. But no, aside from that, there is no threat of inflation. Because the Fed is fully prepared to absorb $3 trillion in excess money....). As to Europe, Roubini thinks austerity will also result in a disaster, first for the periphery and then for Germany, so basically damned if you do and damned if you don't vis-a-vis stimulating, which is precisely what we have been saying for over a year: the central banks have boxed themselves in a corner from which there is no escaping, regardless of what they do. Lastly, on Asia, and specifically China, Roubini notes the obvious that even the world's most overheating economy is faced with so many problems that it can only do what the US has been doing so well to date: kick the can down the road.
Full FT Interview after the jump: