Doomsday Economist Warns Perfect Storm Is Already Here
Global recession could be arriving earlier than scheduled, expert says
Wednesday, July 11, 2012
Nouriel Roubini is also known as Dr. Doom. He correctly predicted 2008's housing market collapse and the noted economics professor has been bearish on the economy almost ever since.
Earlier this year Roubini warned that the economy faced “a perfect storm.” Growth will slow in the U.S., he said, Europe will be gripped by its debt troubles, the economy will slow in China and military tensions in the Persian Gulf will all combine to throw the world economy into recession.
And it's all happening now, he says.
“2013 perfect storm scenario I wrote on months ago is unfolding,” Roubini said in a Tweet.
Worse than 2008
Roubini said what he sees as the coming crisis will be worse than 2008 because central banks, like the Federal Reserve, had pretty much run out of ways to stimulate the economy. Policy options, he says, are extremely limited.
Roubini's four horsemen of the apocalypse don't include the so-called “fiscal cliff” scenario. Fed Chairman Ben Bernanke first invoked that phrase to warn Congress that it must take action to prevent automatic tax hikes and federal spending cuts from taking effect at the end of the year.
Last year in its contentious debt ceiling negotiations, Congress put in place a scenario whereby huge across the board federal spending cuts would go into effect until lawmakers approved an alternate deficit-cutting plan. At the same time, lower tax rates for everyone are set to expire, reverting to their higher pre-2001 levels.
Counting on Congress
No one thinks Congress will be able to overcome extreme partisanship and ideological gridlock in the six weeks after the November election to head off the looming “fiscal cliff.”
In a report to clients Michelle Meyer of Bank of America Merrill Lynch says the “fiscal cliff” is not just an end-of-the-year story – it's here now. Businesses are already beginning to cut planned expenditures because they expect tax rates to go up at the end of the year. In other words, they are reacting now, not waiting.
President Obama Monday proposed extending the Bush-era tax rates for everyone except those earning more than $250,000 a year. Republicans -- and even a few Democrats -- have called for extending the lower rates for all, at least temporarily.