Roubini : lessons. Like from the US, UK, Ireland, Iceland , Spain, real estate bubbles | NOURIEL ROUBINI BLOG

Wednesday, January 5, 2011

Roubini : lessons. Like from the US, UK, Ireland, Iceland , Spain, real estate bubbles

Nouriel Roubini :"...There are many lessons. Like in US, UK, Ireland, Iceland , Spain, if you let the real estate bubble to get out of hand and burst, then the collateral damage, in the real economy, to the public finances is severe.
And deterioration in public finances is both driven by the need to bail out banks and also by surging deficits due to collapse of their real economic activity. In case of Ireland, one of the lessons is that, I think it was a mistake to honour unsecured claims on the banks amounting to 10% of GDP. By the sovereign guaranteeing these claims, the public debt has grown by another 10% of the GDP. In this case, sovereign was already distressed.
So, if you keep on socialising private losses and putting them on the back of the sovereign, then at some point the back of the sovereign is going to crack. And the insolvency of the sovereign is going to be damaging back into the real economy and the financial system because the sovereign will not be able to backstop the financial system.So I would have responded by imposing a haircut on the unsecure senior creditors of the bank. ...."

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Nouriel Roubini, (born March 29, 1958, Istanbul, Turkey), Turkish-born American economist and educator who was best known for predicting the 2007–08 subprime mortgage crisis in the United States and the subsequent global financial crisis.

Born to Iranian Jewish parents, Roubini moved with his family to Iran and Israel before they settled in Italy in 1962. After a year at Hebrew University of Jerusalem, he studied economics at Bocconi University in Milan (B.A., 1982) and Harvard University (Ph.D., 1988), where he specialized in macroeconomics and international economics. He joined the economics faculty at Yale University in 1988 and taught there until 1995, when he moved to New York University. He also served as a visiting scholar to the International Monetary Fund (IMF), was a research associate with the National Bureau of Economic Research (NBER), held single-year terms on the White House Council of Economic Advisers (1998–99) and at the U.S. Department of the Treasury (1999–2000), and cofounded (2004) the consulting firm Roubini Global Economics. Roubini spent much of his early career studying countries that experienced extreme economic failures, such as Mexico (in 1994), Thailand and other countries associated with the 1997 Asian financial crisis, Russia (1998), and Argentina (2000). He determined that each shared one common element: a massive current account deficit.(www.britannica.com)

Nouriel Roubini is the Chairman and CEO of Roubini Macro Associates, LLC, his own global macroeconomic consultancy firm. He is also a professor of economics at New York University’s Stern School of Business. Dr. Roubini has extensive policy experience as well as broad academic credentials. From 1998 to 2000, he served as the senior economist for international affairs on the White House Council of Economic Advisors and then the senior advisor to the undersecretary for international affairs at the U.S. Treasury Department, helping to resolve the Asian and global financial crises, among other issues. The International Monetary Fund, the World Bank and numerous other prominent public and private institutions have drawn upon his consulting expertise.