Nouriel Roubini: Economic Perfect Storm in 2013 Could Surpass 2008
There’s an economic storm headed our way and it could surpass the force of the one experienced in 2008 according to NYU professor and economist Nouriel Roubini.
Incentives remain for banks to cheat and do things that are immoral, said Roubini. One solution is to break up the financial supermarkets, he added. Roubini said bankers have always been greedy, but there are ways to minimize risks they place on the economy which include separating their activities so you minimize conflicts of interest. Otherwise crises will occur again and again, he added.
Another way to subvert risky illegal moves would be to place some offenders in jail rather than simply levying fines. However, Roubini is skeptical of any changes being made and said there were more conflicts of interest today than four years ago. Along with this, banks have become even bigger. JP Morgan took over Washington Mutual and Bear Stearns. Bank of Americal took over Merrill Lynch and Countrywide, Roubini pointed out.
Roubini characterized the European Summit as a failure evidenced by the fact that Spanish rates are back above 7% and the stock market there fell three percent. Roubini feels there could be another bigger crisis, not six months from now, but in two weeks. The only institution with the firepower to back-stop the banks is the European Central Bank (ECB) through debt monetization, but the ECB says they are not legally allowed to do this. Debt monetization is not accepted amongst the core EU nations such as Germany, the Netherlands, Austria, and Finland. Finland doesn’t even want to accept a small and limited amount of debt monetization, which was recently agreed upon, and will fight against it, said Roubini.
Roubini commented further on the economic challenges facing the various regions of the world exacerbated by the developing recession in the Eurozone. He also mentioned a potential U. S. war against Iran which could result in a doubling of oil prices overnight. He added that events, both economic and geopolitical, could result in a perfect storm in 2013. According to Roubini, things will be much worse than in 2008 because governments are running out of policy bullets.
The last time I checked in on the views of Roubini was back in March where he saw the economy at a tipping point [link]. It still seems to be tipping.