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Roubini Sees 60% Chance of A Double Dip in 2012, China and Brazil Also at Risk
By EconMatters
Party heardy NYU economist Nouriel Roubini went on Bloomberg TV on Aug. 31 to give his latest prediction of the global economy:
"We’ve reached a stall speed in the economy, not just in the U.S., but in the euro zone and the UK. We see probably a 60 percent probability of recession next year, and, unfortunately, we’re running out of policy tools.....and sovereigns cannot bail out their own distressed banks because they are distressed themselves"
Regarding markets and QE3
"There’ll be more monetary easing and quantitative easing done by the Fed and other central banks, but the credit channel is broken. ...the market is rallying on the expectation of QE3, but I think it will be a short-lived rally. The macro data, ISM, employment, and housing numbers will come out worse and worse, the market will start to correct again."
The bond market is already expecting a recession,
"...After the S&P downgrade, bond yields fell from 2.5% to 2% or below. The bond market is telling as a recession is coming and the flattening of the yield curve is telling us that."
But since the short-term interest rate is artificially held down low by the Fed,
“Traditionally, you can have inversion of the yield curve. Right now, we have policy rates at 0......We cannot have an inversion because you can have negative long-term interest rates. That’s the reason we don’t see the inversion.”
Dr. Doom did not forget about China either,
"I see a hard landing in China as the likely event, not this year or next year, but by 2013 when this over investment move will go bust..... Fixed investment has gone now to 50% of GDP. this over investment boom is going to go into a bust in a hard landing.”
"[Chinese banks] have several trillion dollars yuans and we estimate 30% of these loans will go into default and become underperforming. The heat will be on the Chinese banks.”
After the C, he then went on to cover the B in BRIC,
"Brazil has its own other domestic problems, if they do the structural reform that’s needed. It could have high potential growth, but the question is whether the new president will be willing to do those structural reforms to reduce the distortion and increase the potential growth of the country."
Commentary by EconMatters
Shortly after the interview, Bloomberg ran this headline - U.S. Stocks Pare Gains After Rubini Says Recession Is Starting. It might be that markets really rise and fall on the words of Roubini or it could just be Bloomberg pumping its TV news show; regardless, we believe there's not enough clear indication to declare a coming recession yet.
Remember, this is the traditional summer doldrums, and markets are still reeling from the unprecedented downgrade of the U.S. debt by S&P, black swans flocking in Europe certainly has only added to the market turmoil and volatility. So it is logical to see some mixed and somewhat pessimistic data coming out of this current environment, but they are not indicative enough to extrapolate out a recession.
Also keep in mind that 2012, the year when Roubini predicts the recession would hit, is an election year. You can bet the Fed, the Obama Administration, and the Democratic Party will pull out all the stops to stave off a downright recession.
So we think a slow / anemic growth is a more likely scenario; however, this is not to say there's no possibility that Roubini could be right.....again. After all, the man has been predicting double dip for the past four years, and even a broken clock could be right at least twice a day.
(Pardon our tech inept unable to post the vid on ZH. If interested, the Bberg vid is available at our site)
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Now wait a minute Smiddy, Andrew Jackson didn't bow to the bankers. Wasn't he president
between Ford and Carter?
I followd you until your last sentence/question, which had me DUH??
I often ask my son-in-law who is a trader" what will the market do next week" and he always replies " well , it can go either way" followed by changing the subject. He like Roubini are candidates for a Nobel Prize in economics.
maybe your son-in-law keeps the smart stuff for the exclusive use of your daughter, in which case, kudos to him; he has his priorities right.
BTW : you sound a bit like Doris Day in that movie.
Roubini may get it right this time.
Likely that most of you saw last night that Brazil cut rates (12.5% down to 12.0%). That is a sign that things might be turning south in macro-Asia...
I think that's a bad sign for everywhere. They are going to cut again...as will Japan, Switz, EU, of course the Aussie may cut soon too...all leading back to the dollar which can't go any lower.
Bullish for precious metals...but you know about those.
The Rube said gold would never break $1,100. Just that statement alone means that whatever he says has no credibility. How can a supposed economist not know what real money is?
God created economists to make weather men look good!
Bu-dum-dum!
Just curious. What happened to the breasts?
Shoulda seen the Icon before the twin peaks.
It's actually a 63.48% chance. (Bloody economists...)
If I was Tyler, id hide them boots in a safe place with Roubini around!
Only if they're for some reason full of spam.
Other then the poor call on gold, anybody know his forecast history?
suckers rally S&P 700
any without a PhD are scum
f roubini
until he licks Tyler's gold-toe boots
James Sees 100% Chance Roubini Is An Idiot in 2011 And Beyond.
People Listening To Him Are Also At Risk Financially "Going Forward"
Details @ Eleven.
sarc