Thursday, February 21, 2013

Roubini : Don’t Underestimate the Economic and Financial Effects of the Sequester

Don’t Underestimate the Economic and Financial Effects of the Sequester: Nouriel Roubini
Daily Ticker -

The stock market suffered its worst day in three months Wednesday after minutes from the last Fed meeting suggested the central bank could slow its asset purchases which have helped keep rates low and stock market prices high. Today stocks are down roughly 0.50%.

Economist Nouriel Roubini of NYU’s Stern School of Business tells The Daily Ticker that it’s not only monetary stimulus by the Fed that’s been driving stocks higher but also “more unconventional monetary policy” from the ECB, Bank of Japan, Bank of England and the Swiss National Bank. That stimulus is aimed at boosting economic growth and it may have helped, helping but the global economy is slowing.

In the fourth quarter, the major economies of the U.S., U.K, Japan and the Eurozone all contracted and they could slow even more because of spending cuts, says Roubini. “The core of the Eurozone has to do it, the U.S. has to do it…and when you have synchronized fiscal contraction the negative effects on economic growth are worse."

He’s forecasting 1.6% GDP growth in the U.S. this year, which would be the slowest pace in three years. On the positive side he sees growth in housing manufacturing and energy production, primarily the “shale gas revolution.” On the negative side: big government budget cuts.
- in yahoo finance :
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