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Wednesday, August 15, 2012

Nouriel Roubini 3 Scenarios for the World Economy

Nouriel Roubini : I would say that there are three scenarios. One is continued economic and financial difficulties in advanced economies, but short of another perfect storm. So economic weakness in advanced economies, but avoiding another global economic and financial crisis.
Another one is a global perfect storm. This is more a downside scenario where the euro zone becomes disorderly and eventually you get more countries losing market access, more countries defaulting, more countries exiting the euro zone. You get the U.S. slowing down and then having a stall speed and a bubble bursting. You get a hard landing in China. You get a stall in growth in emerging markets. And you get a war in the Middle East between Israel and the U.S. on one side and Iran [on the other]. You know, it’s a bubbling of all crises. That will be the perfect storm. You know, that perfect storm is not my baseline scenario, but I would say that all five of those negative trends in a less extreme way are already underway. The euro zone is a slow-motion train wreck. The U.S. is slowing down. The Chinese landing looks harder rather than softer. Other nations are slowing down. And the tensions in the Middle East might build up again. So you have a very bumpy road ahead this year and next year for the global economy.
Then you have an optimistic scenario in which maybe things improve in the U.S.—slowly, slowly. In which the euro zone muddles through and maybe goes toward a greater economic fiscal and political union. China is able to have a soft landing. Emerging markets do the structural reform that they need for growth. And we avoid conflict in the Middle East. Now, if all of those things are happening, well, I don’t expect that by next year the world goes into high economic growth, but maybe emerging markets can grow. And maybe after another two or three years of that bumpy road ahead, advanced economies go back to potential growth. Potential growth maybe is the best we can hope for, for the time being. - in Bloomberg interview
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Nouriel Roubini nicknamed Dr. Doom and lately Dr. Realist by CNBC , is a professor of economics at the Stern School of Business, New York University and chairman of RGE Roubini Global Economics, an economic consultancy firm . Prof. Nouriel Roubini A world-class economist who offers an unflinching look at the global meltdown and distinctive insights into its course going forward. His research on financial crisis in emerging economics has yielded a unique and now vindicated approach to future collapses. Roubini speaks on the global economic outlook and its implications for the financial markets. From his analysis of past collapses of emerging economies, he has identified common factors that support his predictions of crisis in the US and world markets. He has held several high-level advisory positions in the US government and international finance organisations, published numerous policy papers and books on key international macro-economic issues and is regularly cited as an authority in