“I’m not a pessimist by nature. I’m not someone who sees things in a bleak way.”
— Nouriel Roubini in a New York Times interview
On March 6, 2009, the India Today Conclave in New Delhi, India, an international forum for ideas and debate, was dominated by a tall man dressed in a black and white ensemble as most always. Nouriel Roubini, a Harvard-trained economist earned his stripes working for the International Monetary Fund, the Federal Reserve, World Bank and the Bank of Israel. He also served as senior economist for the Council of Economic Advisers, and later became the senior adviser to Timothy Geithner, during the Clinton administration.
Roubini was once again creating headlines with his prediction that the global recession may continue until the end of 2010, as governments are not reacting fast enough. In fact, a year ago he forecast an 18-month recession, and his latest take is that the recession may last for possibly 36 months. On the horizon, he sees the risks of an L-shaped stagnation, a long period with little or no economic growth. The Istanbul-born economist went on to say that the global economy may shrink by 1% or grow 0.5% in 2009 before recovering to 1% growth in 2010. According to Roubini, the G8 and G20, which include countries like the U.S., Europe and Japan, must come together and act to save their economies and that of the world. By his own admission he was, “one of most bearish people (but) the economy has surprised the bears on the downside.”
Roubini’s admission probably arose from the nicknames of Dr. Doom and ‘permabear’, monikers earned in 2006 when he first predicted that an economic crisis was fast on its way. His audience at the time consisted of economists at the International Monetary Fund who were skeptical, even dismissive, of his forecast. These skeptics found it hard to believe there would be such a catastrophe at a time when the economy was growing despite soaring oil prices.
But Roubini was vindicated in 2008 as the economic storm broke out uprooting the foundations of economies across the globe. Three years ago, Roubini was a relatively obscure economist but his economic forecasts, albeit riddled with criticism, have catapulted him into the limelight. As most sought comfort in conventional wisdom that revered Wall Street would come out of the crisis, Roubini warned that it wouldn’t and that some of the biggest would fall. Not much later, the mighty Bear Stearns crumbled. Many took succor in the Fed’s actions to steer the economy around, but Roubini dismissed the relief as nothing more than ‘delusional complacency’. He said that more is yet to come including a wave of corporate bankruptcies and market collapses.
Have all of Roubini’s forecasts come true? No, but so many have that the economist’s status has been elevated to somewhat of a seer. He is now much sought after by economists, ministers and governors alike. But he has his critics. Foremost among these is Anirvan Banerji, an economist, who dismissed Roubini’s crucial 2006 prediction. Banerji says Roubini did not use mathematical models and his predictions were mere hunches. He says Roubini has been by and large pessimistic for a long time and his apparent foresight is nothing more than a coincidence of unlucky events.
That said, what is Roubini saying next? This time he warns that the insolvent American banks must be nationalized and has suggested that the U.S. Treasury Secretary, Timothy Geithner, should go beyond his recently unveiled bailout plan. If further corrective measures are not taken, Roubini somberly states, the current crisis might just be the beginning of the end of the American empire. But this time around, will the world be listening to Roubini?
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