Nouriel Roubini : I would say that there are three scenarios. One is continued economic
and financial difficulties in advanced economies, but short of another
perfect storm. So economic weakness in advanced economies, but avoiding
another global economic and financial crisis.
Another one is a
global perfect storm. This is more a downside scenario where the euro
zone becomes disorderly and eventually you get more countries losing
market access, more countries defaulting, more countries exiting the
euro zone. You get the U.S. slowing down and then having a stall speed
and a bubble bursting. You get a hard landing in China. You get a stall
in growth in emerging markets. And you get a war in the Middle East
between Israel and the U.S. on one side and Iran [on the other]. You
know, it’s a bubbling of all crises. That will be the perfect storm. You
know, that perfect storm is not my baseline scenario, but I would say
that all five of those negative trends in a less extreme way are already
underway. The euro zone is a slow-motion train wreck. The U.S. is
slowing down. The Chinese landing looks harder rather than softer. Other
nations are slowing down. And the tensions in the Middle East might
build up again. So you have a very bumpy road ahead this year and next
year for the global economy.
Then you have an optimistic scenario
in which maybe things improve in the U.S.—slowly, slowly. In which the
euro zone muddles through and maybe goes toward a greater economic
fiscal and political union. China is able to have a soft landing.
Emerging markets do the structural reform that they need for growth. And
we avoid conflict in the Middle East. Now, if all of those things are
happening, well, I don’t expect that by next year the world goes into
high economic growth, but maybe emerging markets can grow. And maybe
after another two or three years of that bumpy road ahead, advanced
economies go back to potential growth. Potential growth maybe is the
best we can hope for, for the time being. - in Bloomberg interview
