Nouriel Roubini, co-founder and chairman of Roubini Global Economics, was interviewed on CNBC this week regarding his view on the prospects for the economy and stock market. Roubini started out comparing the risks now compared to what was discussed in Davos last year. He said risks to the economy were reduced, not due to robust economic growth as he cited many examples of double-dip and triple-dip recessions experienced around the world, but mainly due to monetary easing around the world.
Roubini said stock markets were bouyant and rightly so since tail risks of a Eurozone breakup, Chinese hard landing, U. S. falling to stall speed, and war in the middle east had been reduced. In the middle of last year central banks engaged in a massive round of quantitative easing, Roubini added. Roubini proceeded to cite a litany of easing moves initiated around the world. “Easy money implies asset inflation in advanced economies and emerging markets,” Roubini said.
When host Andrew Ross Sorkin asked Roubini what would happen when central banks needed to tighten monetary policy, Roubini answered he didn’t think that would happen anytime soon. Growth is below trend and inflation is low in most advanced economies, according to Roubini.
Roubini proceeded to explain his calculations behind a predicted growth rate of 1.7 percent for the U. S. economy.
The interview continued with Roubini discussing the interplay of forces including public stimulus, public debt, and their effect on economic growth; why he doesn’t believe the unemployment rate will fall to seven percent this year and and how it could be positive for the markets.
In a second part of the interview (2nd video below), Roubini discussed why the risks of a “perfect storm” economic scenario have been reduced to a 10-20 percent probability and why the stock market could rise 10-15 percent this year.
Back in July 2012, Roubini laid out a scenario where an economic storm in 2013 could surpass the experience in 2008 [link].