The brilliant Nouriel Roubini, the swashbuckling NYU economist who predicted the disastrous credit and housing bubble in the U.S. during 2008, told me yesterday he sees “frothiness” not a bubble in some sectors of the U.S. bond market and in the housing markets of 17 foreign nations like Switzerland, Sweden, Norway, Hong Kong, Indonesia, China and Brazil that could become “outright bubbles” someday if they are not reigned in.
Mostly, though, Roubini is predicting zero interest rates from the Fed until mid-2015, when he he believes the money supply will be tightened, and interest rates will rise slowly over a period of four years to reach 4% by 2018. This slow upward climb of interest rates should reduce the chances of a calamitous bubble bursting in the bond market and the mortgage market, asserts Roubini. By comparison, interest rates rose from 1% to 5.25% in two short years in the last tightening cycle.
The NYU economist also sees no bubble developing in the stock markets, which are fairly priced today, unless the next two years brings sharp gains of 20% each year. He predicts slow, gradual growth in the U.S. economy, recovery in Europe and Japan, and economic growth at an average of 5% in the emerging nations of China, Brazil and India. Just enough good news to see the rate of unemployment gradually decline.
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| Nouriel Roubini |
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Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
