Roubini : It is hard to predict bubbles and their bursts | NOURIEL ROUBINI BLOG

Sunday, April 28, 2013

Roubini : It is hard to predict bubbles and their bursts

Nouriel Roubini : It is hard to predict bubbles and their bursts, but I would say that we are having tension in the US and the global economy. On one side, growth is weak in advanced economies and unemployment rate is high and that justifies more quantitative easing. Existing quantitative easing and zero policy rate very slowly will try and support recovery but on the other side, a lot of this liquidity is not creating credit for the real economy and is going into asset prices, greater risk taking and greater leveraging into the financial system. There is already frothiness in the asset market in the US and over time low rates are going to cause credit, asset and equity bubbles which may become dangerous. Not today, but certainly three to four years of zero policy rates will lead to that. There could be a repeat of the cycle which we had seen between 2004 and 2008 when real economy weakness justified keeping rates low for longer and exiting from those low rates slower, but that attempt to stabilize the real economy created financial instability and frothiness that led to a bubble which eventually busted. - in livemint

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.