Nouriel Roubini
Encyclopedia
Nouriel Roubini is an American economist
. He claims to have predicted both the collapse of the United States housing market
and the worldwide recession which started in 2008. He teaches at New York University
's Stern School of Business and is the chairman of Roubini Global Economics, an economic consultancy firm.
The child of Iranian Jews, he grew up in Italy. After receiving a BA in political economics at Bocconi University
, Milan
and a doctorate in international economics
at Harvard University
, he became an academic at Yale
and a practicing economist at the International Monetary Fund
(IMF), the Federal Reserve, World Bank
, and Bank of Israel
. Much of his early research focused on emerging markets. During the administration of President Bill Clinton
, he was a senior economist for the Council of Economic Advisers
, later moving to the United States Treasury Department as a senior adviser to Timothy Geithner, who in 2009 became Treasury Secretary.
Roubini's critical economic views have earned him the nicknames "Dr. Doom" and "permabear" in the media. In 2008, Fortune magazine wrote, "In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra
. Now he's a sage". The New York Times notes that he foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". In September 2006, he warned a skeptical IMF that "the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence, and, ultimately, a deep recession". Nobel laureate Paul Krugman
adds that his once "seemingly outlandish" predictions have been matched "or even exceeded by reality."
As Roubini's descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy, and spends much of his time shuttling between meetings with central bank
governors and finance minister
s in Europe and Asia. Although he is ranked only 512th in terms of lifetime academic citations, he was #4 on Foreign Policy
magazine's list of the "top 100 global thinkers." He has appeared before Congress, the Council on Foreign Relations
, and the World Economic Forum
at Davos
.
, Turkey
, to Iranian Jewish parents. When he was an infant, his family lived briefly in Iran
and Israel
. From 1962 to 1983 he resided in Italy
, especially in Milan
, where he attended the local jewish school and then the Bocconi University
, earning a B.A.
, summa cum laude, in economics
. He received his Ph.D.
in international economics
from Harvard University
in 1988, where his adviser was Jeffrey Sachs
. He is a U.S. citizen and speaks English
, Persian
, Italian
, and Hebrew.
and then in New York, while also being employed at the International Monetary Fund
, the Federal Reserve, World Bank
, and Bank of Israel
. Currently, he is a professor at the Stern School of Business at New York University
. Long study of emerging market blowouts in Asia and Latin America helped him spot the looming disaster in the U.S. "I’ve been studying emerging markets for 20 years, and saw the same signs in the U.S. that I saw in them, which was that we were in a massive credit bubble," he said.
By 1998, he joined the Clinton administration first as a senior economist in the White House Council of Economic Advisers and then moved to the Treasury department as a senior adviser to Timothy Geithner, then the undersecretary for international affairs, who in 2009 became Treasury secretary in the Obama administration.
Roubini returned to the IMF in 2001 as a visiting scholar while it battled a financial meltdown in Argentina
. He cowrote a book on saving bankrupt economies entitled, Bailouts or Bail-ins? and launched his own consulting firm.
. For me he’s the model of a great intellectual. He is both a rigorous academic and very human, involved in big picture issues such as poverty, AIDS
, and Africa
. He’s someone with a great mind that is also very engaged with the world. Another intellectual hero is Larry Summers, the former President of Harvard, an amazing intellectual and academic, who is very deeply involved with the policy world. I worked for him for many years in the US Treasury during the Clinton Administration".
Partly to fulfill this need, he became chairman of RGE
, an economic consultancy for financial analysis
. In describing the purpose of RGE Monitor, he said, "the world is my home, so everything about society and culture—no matter how miniscule—is worth knowing. I am an information junkie and created RGE Monitor to collect information about what’s happening around the world."
Speaking of his early influences, Roubini said, "I was born into a relatively orthodox Jewish family in Iran, lived in Israel and Turkey, and then moved to Italy as a child. By the age of six, instead of going to a yeshiva
, I went to a secular Jewish school where I interacted with kids from all sorts of different backgrounds. Had I gone to an orthodox
Jewish school, I would perhaps be orthodox now and may have never become a Global Nomad."
Asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%. . . . I don’t believe in picking individual stocks or assets. . . . Never invest your money as though you are gambling at the casino. Buying and selling individual stocks is a waste of time."
deficits financed by loans from abroad. Roubini theorized that the United States might be the next to suffer, and as early as 2004 began writing about a possible future collapse. Business Week magazine writer Michael Mandel, however, noted in 2006 that Roubini and other economists often make general predictions which could happen over multiyear periods.
In September 2006, he foresaw the end of the real estate bubble: "When supply increases, prices fall: that’s been the trend for 110 years, since 1890. But since 1997, real home prices have increased by about 90 percent. There is no economic fundamental—real income, migration, interest rates, demographics—that can explain this. It means there was a speculative bubble. And now that bubble is bursting." In the Spring 2006 issue of International Finance
, he wrote an article titled "Why Central Banks Should Burst Bubbles" in which he argued that central banks should take action against asset bubbles. When asked whether the real estate ride was over, he said, "Not only is it over, it’s going to be a nasty fall."
By May 2009, he felt that analysts expecting the U.S. economy to rebound in the third and fourth quarter were "too optimistic". He expected the full recession to last 24 or 36 months, and believed in the possibility of an "L-shaped" slow recovery that Japan went through in The Lost Decade
.
In his opinion, much of the current recession's cause is due to "boom-and-bust cycles," and he feels the U.S. economy needs to find a different growth path in the future. "We’ve been growing through a period of time of repeated big bubbles," he said. "We’ve had a model of 'growth' based on overconsumption and lack of savings. And now that model has broken down because we borrowed too much." He feels that too much human capital went into financing the "most unproductive form of capital, meaning housing" and would like to see America create a model of growth in more-productive activities. He feels that "sustainable growth may mean investing slowly in infrastructures for the future, and rebuilding our human capital," by investing in renewable resources. "We don’t know what it’s going to be," he says, "but it’s going to be a challenge to find a new growth model. It’s not going to be simple."
Recovery from recession
In August 2009, Roubini predicted that the global economy would begin recovering near the end of 2009, but the U.S. economy is likely to grow only about one percent annually during the next two years, which is less than the three percent normal "trend." He noted that the Fed is "now embarked on a policy in which they are in effect directly monetizing
about half of the budget deficit," but that as of now "monetization is not inflationary," as banks were holding much of the money themselves and not relending it. When these attitudes reverse at the end of the recession, that would be time for an "exit strategy, of mopping up that liquidity" and taking some of the money back out of circulation, "so it doesn’t just bid up house prices and stock values in a new bubble. And that will be 'very, very tricky indeed,'" he stated.
Also, in late July, he warned that if no clear exit strategy is outlined and implemented, there was the potential of a perfect storm: fiscal deficits, rising bond yields, higher oil prices, weak profits, and a stagnant labor market, which combined could "blow the recovering world economy back into a double-dip recession."
In 2006 Roubini predicted that Italy, and possibly a series of other eurozone countries (Portugal, Spain, Greece) might have to exit the eurozone if they did not implement "serious economic reforms." " [It] is not a foregone conclusion but, if Italy does not reform, an exit from EMU within 5 years is not totally unlikely. Indeed, like Argentina, Italy faces a growing competitiveness loss given an increasingly overvalued currency and the risk of falling exports and growing current account deficit. The growth slowdown will make the public deficit and debt worse and potentially unsustainable over time. And if a devaluation cannot be used to reduce real wages, the real exchange rate overvaluation will be undone via a slow and painful process of wage and price deflation."
As of January 2009, he remained pessimistic about the U.S. and global economy. He said in September, 2008, "we have a subprime financial system, not a subprime mortgage market". "As the U.S. economy shrinks, the entire global economy will go into recession. In Europe
, Canada
, Japan
, and the other advanced economies, it will be severe. Nor will emerging market economies—linked to the developed world by trade in goods, finance, and currency—escape real pain." He was quoted in South Africa's 2009 budget speech for his role in predicting the current financial crisis in the developed markets.
Roubini notes that the subprime issues are a global, and not just a U.S. problem. In an interview with author James Fallows
in late spring of 2009, he stated, "People talk about the American subprime problem, but there were housing bubbles in the U.K., in Spain
, in Ireland
, in Iceland
, in a large part of emerging Europe, like the Baltics all the way to Hungary
and the Balkans. It was not just the U.S., and not just 'subprime.' It was excesses that led to the risk of a tipping point in many different economies."
His pessimism is focused on the short-run rather than the medium or long-run. In Foreign Policy (Jan/Feb 2009), he writes, "Last year’s worst-case scenarios came true. The global financial pandemic
that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst".
At a conference in Dubai
in January, 2009, he said, the U.S. banking system was "effectively insolvent." He added that the "systemic banking crisis.... The problems of Citi, Bank of America
and others suggest the system is bankrupt. In Europe, it’s the same thing." To deal with this problem, he recommends that the U.S. government "do triage between banks that are illiquid and undercapitalized but solvent, and those that are insolvent. The insolvent ones you have to shut down." He adds, "We're in a war economy. You need command-economy allocation of credit to the real economy. Not enough is being done," he felt at the time.
In 2010, he again warned that despite an improved economy with rising stock markets, the crisis was not over and new bubbles were on the horizon:
In late May 2010, markets around the world began dropping due partly to problems in Greece and the Eurozone. "Roubini believes Greece will prove to be just the first of a series of countries standing on the brink," writes the Telegraph. Roubini explains the new issues governments must deal with:
China
Roubini met officials in China during spring 2009, and points out that many Chinese commentators blame American "overborrowing and excess" for dragging them into a recession. However, he states that "even they realize that the very excess of American demand has created a market for Chinese exports." He adds that although Chinese leaders "would love to be less dependent on American customers and hate having so many of their nation’s foreign assets tied up in U.S. dollars," they’re now "more worried about keeping Chinese exporters in business. . . . I don’t think even the Chinese authorities have fully internalized the contradictions of their position."
Roubini and political scientist Ian Bremmer
have described the 21st century world as fragmenting economically and politically, where the "old models of understanding global dynamics are struggling" to keep up with rapid changes. In an article in Foreign Affairs magazine, they describe what they call a "G-Zero world," where the United States no longer has the resources to continue as the primary provider of global public goods. As a result, there is likely to be more conflict than cooperation between countries, creating a "zero sum game," a "game in which my win is your loss." They explain their rationale:
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
. He claims to have predicted both the collapse of the United States housing market
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
and the worldwide recession which started in 2008. He teaches at New York University
New York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
's Stern School of Business and is the chairman of Roubini Global Economics, an economic consultancy firm.
The child of Iranian Jews, he grew up in Italy. After receiving a BA in political economics at Bocconi University
Bocconi University
Bocconi University is a private university located in central Milan, beside Parco Ravizza. Bocconi provides undergraduate, graduate and post-graduate education, in addition to a range of double degree programs, in the fields of economics, management, finance and law. According to many university...
, Milan
Milan
Milan is the second-largest city in Italy and the capital city of the region of Lombardy and of the province of Milan. The city proper has a population of about 1.3 million, while its urban area, roughly coinciding with its administrative province and the bordering Province of Monza and Brianza ,...
and a doctorate in international economics
International economics
International economics is concerned with the effects upon economic activity of international differences in productive resources and consumer preferences and the institutions that affect them...
at Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
, he became an academic at Yale
YALE
RapidMiner, formerly YALE , is an environment for machine learning, data mining, text mining, predictive analytics, and business analytics. It is used for research, education, training, rapid prototyping, application development, and industrial applications...
and a practicing economist at the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF), the Federal Reserve, World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, and Bank of Israel
Bank of Israel
The Bank of Israel is the central bank of Israel. It is located in Kiryat HaMemshala in Israel's capital city of Jerusalem, with a branch office in Tel Aviv. The current governor is Stanley Fischer.-History:...
. Much of his early research focused on emerging markets. During the administration of President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
, he was a senior economist for the Council of Economic Advisers
Council of Economic Advisers
The Council of Economic Advisers is an agency within the Executive Office of the President that advises the President of the United States on economic policy...
, later moving to the United States Treasury Department as a senior adviser to Timothy Geithner, who in 2009 became Treasury Secretary.
Roubini's critical economic views have earned him the nicknames "Dr. Doom" and "permabear" in the media. In 2008, Fortune magazine wrote, "In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra
Cassandra
In Greek mythology, Cassandra was the daughter of King Priam and Queen Hecuba of Troy. Her beauty caused Apollo to grant her the gift of prophecy...
. Now he's a sage". The New York Times notes that he foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". In September 2006, he warned a skeptical IMF that "the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence, and, ultimately, a deep recession". Nobel laureate Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
adds that his once "seemingly outlandish" predictions have been matched "or even exceeded by reality."
As Roubini's descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy, and spends much of his time shuttling between meetings with central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
governors and finance minister
Finance minister
The finance minister is a cabinet position in a government.A minister of finance has many different jobs in a government. He or she helps form the government budget, stimulate the economy, and control finances...
s in Europe and Asia. Although he is ranked only 512th in terms of lifetime academic citations, he was #4 on Foreign Policy
Foreign Policy
Foreign Policy is a bimonthly American magazine founded in 1970 by Samuel P. Huntington and Warren Demian Manshel.Originally, the magazine was a quarterly...
magazine's list of the "top 100 global thinkers." He has appeared before Congress, the Council on Foreign Relations
Council on Foreign Relations
The Council on Foreign Relations is an American nonprofit nonpartisan membership organization, publisher, and think tank specializing in U.S. foreign policy and international affairs...
, and the World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....
at Davos
Davos
Davos is a municipality in the district of Prättigau/Davos in the canton of Graubünden, Switzerland. It has a permanent population of 11,248 . Davos is located on the Landwasser River, in the Swiss Alps, between the Plessur and Albula Range...
.
Early life and education
Nouriel Roubini was born in IstanbulIstanbul
Istanbul , historically known as Byzantium and Constantinople , is the largest city of Turkey. Istanbul metropolitan province had 13.26 million people living in it as of December, 2010, which is 18% of Turkey's population and the 3rd largest metropolitan area in Europe after London and...
, Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
, to Iranian Jewish parents. When he was an infant, his family lived briefly in Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
and Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
. From 1962 to 1983 he resided in Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, especially in Milan
Milan
Milan is the second-largest city in Italy and the capital city of the region of Lombardy and of the province of Milan. The city proper has a population of about 1.3 million, while its urban area, roughly coinciding with its administrative province and the bordering Province of Monza and Brianza ,...
, where he attended the local jewish school and then the Bocconi University
Bocconi University
Bocconi University is a private university located in central Milan, beside Parco Ravizza. Bocconi provides undergraduate, graduate and post-graduate education, in addition to a range of double degree programs, in the fields of economics, management, finance and law. According to many university...
, earning a B.A.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
, summa cum laude, in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. He received his Ph.D.
Doctor of Philosophy
Doctor of Philosophy, abbreviated as Ph.D., PhD, D.Phil., or DPhil , in English-speaking countries, is a postgraduate academic degree awarded by universities...
in international economics
International economics
International economics is concerned with the effects upon economic activity of international differences in productive resources and consumer preferences and the institutions that affect them...
from Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
in 1988, where his adviser was Jeffrey Sachs
Jeffrey Sachs
Jeffrey David Sachs is an American economist and Director of The Earth Institute at Columbia University. One of the youngest economics professors in the history of Harvard University, Sachs became known for his role as an adviser to Eastern European and developing country governments in the...
. He is a U.S. citizen and speaks English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...
, Persian
Persian language
Persian is an Iranian language within the Indo-Iranian branch of the Indo-European languages. It is primarily spoken in Iran, Afghanistan, Tajikistan and countries which historically came under Persian influence...
, Italian
Italian language
Italian is a Romance language spoken mainly in Europe: Italy, Switzerland, San Marino, Vatican City, by minorities in Malta, Monaco, Croatia, Slovenia, France, Libya, Eritrea, and Somalia, and by immigrant communities in the Americas and Australia...
, and Hebrew.
Career
For much of the 1990s, Roubini combined academic research with policy making by teaching at YaleYALE
RapidMiner, formerly YALE , is an environment for machine learning, data mining, text mining, predictive analytics, and business analytics. It is used for research, education, training, rapid prototyping, application development, and industrial applications...
and then in New York, while also being employed at the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
, the Federal Reserve, World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, and Bank of Israel
Bank of Israel
The Bank of Israel is the central bank of Israel. It is located in Kiryat HaMemshala in Israel's capital city of Jerusalem, with a branch office in Tel Aviv. The current governor is Stanley Fischer.-History:...
. Currently, he is a professor at the Stern School of Business at New York University
New York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
. Long study of emerging market blowouts in Asia and Latin America helped him spot the looming disaster in the U.S. "I’ve been studying emerging markets for 20 years, and saw the same signs in the U.S. that I saw in them, which was that we were in a massive credit bubble," he said.
By 1998, he joined the Clinton administration first as a senior economist in the White House Council of Economic Advisers and then moved to the Treasury department as a senior adviser to Timothy Geithner, then the undersecretary for international affairs, who in 2009 became Treasury secretary in the Obama administration.
Roubini returned to the IMF in 2001 as a visiting scholar while it battled a financial meltdown in Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
. He cowrote a book on saving bankrupt economies entitled, Bailouts or Bail-ins? and launched his own consulting firm.
Role models
He credits a number of economists for his understanding of economics. He said, "One person who has had a great impact on me intellectually was my adviser at Harvard, Jeffrey SachsJeffrey Sachs
Jeffrey David Sachs is an American economist and Director of The Earth Institute at Columbia University. One of the youngest economics professors in the history of Harvard University, Sachs became known for his role as an adviser to Eastern European and developing country governments in the...
. For me he’s the model of a great intellectual. He is both a rigorous academic and very human, involved in big picture issues such as poverty, AIDS
AIDS
Acquired immune deficiency syndrome or acquired immunodeficiency syndrome is a disease of the human immune system caused by the human immunodeficiency virus...
, and Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
. He’s someone with a great mind that is also very engaged with the world. Another intellectual hero is Larry Summers, the former President of Harvard, an amazing intellectual and academic, who is very deeply involved with the policy world. I worked for him for many years in the US Treasury during the Clinton Administration".
Global nomad
He likes to refer to himself as a "global nomad", and says, "You can be sitting still surfing the Internet, and experience other worlds, ideas and societies. But I’ve found that there is nothing better than visiting a different country, even if for three days. ... you can’t only be a virtual Global Nomad, with goggles on, in a virtual reality. You have to be there. You have to see it, smell it and live it. You have to see people, travel, and interact."Partly to fulfill this need, he became chairman of RGE
RGE
RGE may refer to*Racing Green Endurance*Rádio Gravações Especializadas*Rochester Gas and Electric*Roubini Global Economics*Renormalization group equation**Beta-function**Callan–Symanzik equation**Exact renormalization group equation...
, an economic consultancy for financial analysis
Financial analysis
Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project....
. In describing the purpose of RGE Monitor, he said, "the world is my home, so everything about society and culture—no matter how miniscule—is worth knowing. I am an information junkie and created RGE Monitor to collect information about what’s happening around the world."
Speaking of his early influences, Roubini said, "I was born into a relatively orthodox Jewish family in Iran, lived in Israel and Turkey, and then moved to Italy as a child. By the age of six, instead of going to a yeshiva
Yeshiva
Yeshiva is a Jewish educational institution that focuses on the study of traditional religious texts, primarily the Talmud and Torah study. Study is usually done through daily shiurim and in study pairs called chavrutas...
, I went to a secular Jewish school where I interacted with kids from all sorts of different backgrounds. Had I gone to an orthodox
Orthodox Judaism
Orthodox Judaism , is the approach to Judaism which adheres to the traditional interpretation and application of the laws and ethics of the Torah as legislated in the Talmudic texts by the Sanhedrin and subsequently developed and applied by the later authorities known as the Gaonim, Rishonim, and...
Jewish school, I would perhaps be orthodox now and may have never become a Global Nomad."
Personal investments
During an interview in June 2009, he was asked about his personal lifestyle expenses and other investments. He said, "I regularly save about 30% of my income. Apart from my mortgage, I don’t have any other debts. The credit crunch hasn’t affected me much. . . . I’ve always lived within my means and, luckily, have never been out of work. I would say I’m a frugal person—I don’t have very expensive tastes. . . . You don’t need to spend a lot to enjoy things."Asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%. . . . I don’t believe in picking individual stocks or assets. . . . Never invest your money as though you are gambling at the casino. Buying and selling individual stocks is a waste of time."
U.S. economy
In the 1990s, Roubini studied the collapse of emerging economies. He used an intuitive, historical approach backed up by an understanding of theoretical models to analyze these countries and came to the conclusion that a common denominator was the large current accountCurrent account
In economics, the current account is one of the two primary components of the balance of payments, the other being the capital account. The current account is the sum of the balance of trade , net factor income and net transfer payments .The current account balance is one of two major...
deficits financed by loans from abroad. Roubini theorized that the United States might be the next to suffer, and as early as 2004 began writing about a possible future collapse. Business Week magazine writer Michael Mandel, however, noted in 2006 that Roubini and other economists often make general predictions which could happen over multiyear periods.
In September 2006, he foresaw the end of the real estate bubble: "When supply increases, prices fall: that’s been the trend for 110 years, since 1890. But since 1997, real home prices have increased by about 90 percent. There is no economic fundamental—real income, migration, interest rates, demographics—that can explain this. It means there was a speculative bubble. And now that bubble is bursting." In the Spring 2006 issue of International Finance
International Finance (journal)
International Finance is a peer-reviewed academic journal aimed at "bridging the gap between theory and policy in macroeconomics and finance." Its founder and editor-in-chief is Benn Steil, director of international economics at the Council on Foreign Relations.- Purpose :International Finance...
, he wrote an article titled "Why Central Banks Should Burst Bubbles" in which he argued that central banks should take action against asset bubbles. When asked whether the real estate ride was over, he said, "Not only is it over, it’s going to be a nasty fall."
By May 2009, he felt that analysts expecting the U.S. economy to rebound in the third and fourth quarter were "too optimistic". He expected the full recession to last 24 or 36 months, and believed in the possibility of an "L-shaped" slow recovery that Japan went through in The Lost Decade
Lost Decade (Japan)
The is the time after the Japanese asset price bubble's collapse within the Japanese economy, which occurred gradually rather than catastrophically...
.
In his opinion, much of the current recession's cause is due to "boom-and-bust cycles," and he feels the U.S. economy needs to find a different growth path in the future. "We’ve been growing through a period of time of repeated big bubbles," he said. "We’ve had a model of 'growth' based on overconsumption and lack of savings. And now that model has broken down because we borrowed too much." He feels that too much human capital went into financing the "most unproductive form of capital, meaning housing" and would like to see America create a model of growth in more-productive activities. He feels that "sustainable growth may mean investing slowly in infrastructures for the future, and rebuilding our human capital," by investing in renewable resources. "We don’t know what it’s going to be," he says, "but it’s going to be a challenge to find a new growth model. It’s not going to be simple."
Recovery from recession
In August 2009, Roubini predicted that the global economy would begin recovering near the end of 2009, but the U.S. economy is likely to grow only about one percent annually during the next two years, which is less than the three percent normal "trend." He noted that the Fed is "now embarked on a policy in which they are in effect directly monetizing
Monetization
Monetization is the process of converting or establishing something into legal tender. It usually refers to the coining of currency or the printing of banknotes by central banks...
about half of the budget deficit," but that as of now "monetization is not inflationary," as banks were holding much of the money themselves and not relending it. When these attitudes reverse at the end of the recession, that would be time for an "exit strategy, of mopping up that liquidity" and taking some of the money back out of circulation, "so it doesn’t just bid up house prices and stock values in a new bubble. And that will be 'very, very tricky indeed,'" he stated.
Also, in late July, he warned that if no clear exit strategy is outlined and implemented, there was the potential of a perfect storm: fiscal deficits, rising bond yields, higher oil prices, weak profits, and a stagnant labor market, which combined could "blow the recovering world economy back into a double-dip recession."
2006
In 2006 Roubini predicted that Italy, and possibly a series of other eurozone countries (Portugal, Spain, Greece) might have to exit the eurozone if they did not implement "serious economic reforms." " [It] is not a foregone conclusion but, if Italy does not reform, an exit from EMU within 5 years is not totally unlikely. Indeed, like Argentina, Italy faces a growing competitiveness loss given an increasingly overvalued currency and the risk of falling exports and growing current account deficit. The growth slowdown will make the public deficit and debt worse and potentially unsustainable over time. And if a devaluation cannot be used to reduce real wages, the real exchange rate overvaluation will be undone via a slow and painful process of wage and price deflation."
2009
As of January 2009, he remained pessimistic about the U.S. and global economy. He said in September, 2008, "we have a subprime financial system, not a subprime mortgage market". "As the U.S. economy shrinks, the entire global economy will go into recession. In Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, and the other advanced economies, it will be severe. Nor will emerging market economies—linked to the developed world by trade in goods, finance, and currency—escape real pain." He was quoted in South Africa's 2009 budget speech for his role in predicting the current financial crisis in the developed markets.
Roubini notes that the subprime issues are a global, and not just a U.S. problem. In an interview with author James Fallows
James Fallows
James Fallows is an American print and radio journalist. He has been a national correspondent for The Atlantic Monthly for many years. His work has also appeared in Slate, The New York Times Magazine, The New York Review of Books, The New Yorker and The American Prospect, among others. He is a...
in late spring of 2009, he stated, "People talk about the American subprime problem, but there were housing bubbles in the U.K., in Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, in Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
, in Iceland
Iceland
Iceland , described as the Republic of Iceland, is a Nordic and European island country in the North Atlantic Ocean, on the Mid-Atlantic Ridge. Iceland also refers to the main island of the country, which contains almost all the population and almost all the land area. The country has a population...
, in a large part of emerging Europe, like the Baltics all the way to Hungary
Hungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
and the Balkans. It was not just the U.S., and not just 'subprime.' It was excesses that led to the risk of a tipping point in many different economies."
His pessimism is focused on the short-run rather than the medium or long-run. In Foreign Policy (Jan/Feb 2009), he writes, "Last year’s worst-case scenarios came true. The global financial pandemic
Pandemic
A pandemic is an epidemic of infectious disease that is spreading through human populations across a large region; for instance multiple continents, or even worldwide. A widespread endemic disease that is stable in terms of how many people are getting sick from it is not a pandemic...
that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst".
At a conference in Dubai
Dubai
Dubai is a city and emirate in the United Arab Emirates . The emirate is located south of the Persian Gulf on the Arabian Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi...
in January, 2009, he said, the U.S. banking system was "effectively insolvent." He added that the "systemic banking crisis.... The problems of Citi, Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
and others suggest the system is bankrupt. In Europe, it’s the same thing." To deal with this problem, he recommends that the U.S. government "do triage between banks that are illiquid and undercapitalized but solvent, and those that are insolvent. The insolvent ones you have to shut down." He adds, "We're in a war economy. You need command-economy allocation of credit to the real economy. Not enough is being done," he felt at the time.
2010
In 2010, he again warned that despite an improved economy with rising stock markets, the crisis was not over and new bubbles were on the horizon:
- "We are just at the next stage. This is where we move from a private to a public debt problem . . . We socialised part of the private losses by bailing out financial institutions and providing fiscal stimulus to avoid the great recession from turning into a depression. But rising public debt is never a free lunch, eventually you have to pay for it."
In late May 2010, markets around the world began dropping due partly to problems in Greece and the Eurozone. "Roubini believes Greece will prove to be just the first of a series of countries standing on the brink," writes the Telegraph. Roubini explains the new issues governments must deal with:
- "We have to start to worry about the solvency of governments. What is happening today in Greece is the tip of the iceberg of rising sovereign debt problems in the eurozone, in the UK, in Japan and in the US. This... is going to be the next issue in the global financial crisis."
China
Roubini met officials in China during spring 2009, and points out that many Chinese commentators blame American "overborrowing and excess" for dragging them into a recession. However, he states that "even they realize that the very excess of American demand has created a market for Chinese exports." He adds that although Chinese leaders "would love to be less dependent on American customers and hate having so many of their nation’s foreign assets tied up in U.S. dollars," they’re now "more worried about keeping Chinese exporters in business. . . . I don’t think even the Chinese authorities have fully internalized the contradictions of their position."
2011
Roubini and political scientist Ian Bremmer
Ian Bremmer
Ian Bremmer is an American political scientist specializing in US foreign policy, states in transition, and global political risk. He is the president and founder of Eurasia Group, a leading global political risk research and consulting firm...
have described the 21st century world as fragmenting economically and politically, where the "old models of understanding global dynamics are struggling" to keep up with rapid changes. In an article in Foreign Affairs magazine, they describe what they call a "G-Zero world," where the United States no longer has the resources to continue as the primary provider of global public goods. As a result, there is likely to be more conflict than cooperation between countries, creating a "zero sum game," a "game in which my win is your loss." They explain their rationale:
- "Europe is fully occupied for the moment with saving the eurozoneEurozoneThe eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
. Japan is likewise tied down with complex political and economic problems at home. None of these powers’ governments has the time, resources, or domestic political capital needed for a new bout of international heavy lifting. Meanwhile, there are no credible answers to transnational challenges without the direct involvement of emerging powers such as Brazil, China, and India. Yet these countries are far too focused on domestic development to welcome the burdens that come with new responsibilities abroad.
- "We are now living in a G-Zero world, one in which no single country or bloc of countries has the political and economic leverage—or the will—to drive a truly international agenda. The result will be intensified conflict on the international stage over vitally important issues, such as international macroeconomic coordination, financial regulatory reform, trade policy, and climate changeClimate changeClimate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
. This new order has far-reaching implications for the global economy, as companies around the world sit on enormous stockpiles of cash, waiting for the current era of political and economic uncertainty to pass. Many of them can expect an extended wait."
Writings
Roubini is the author of several books, including:- Crisis Economics: A Crash Course in the Future of Finance
- Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies
- Political Cycles and the Macroeconomy
- New International Financial Architecture
Research
Roubini's research interests include:- international macroeconomicsMacroeconomicsMacroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...
and international financeInternational financeInternational finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, global financial system, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes...
; - macroeconomics and fiscal policyFiscal policyIn economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
; - political economyPolitical economyPolitical economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
; - growth theory;
- European monetary issuesCurrencies of the European UnionThere are fourteen currencies of the European Union as of 2011, the principal currency being the euro. The euro is used by the institutions of the European Union and by the eurozone states, which account for 17 of the 27 member states of the European Union...
.
Current appointments
- Research Fellow, National Bureau of Economic ResearchNational Bureau of Economic ResearchThe National Bureau of Economic Research is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end...
- Research Fellow, Centre for Economic Policy Research, LondonLondonLondon is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, UKUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages... - Member, Bretton Woods Committee
- Member, Council on Foreign Relations Roundtable on the International Economy
- Member, Academic Advisory Committee, Fiscal Affairs Department, International Monetary FundInternational Monetary FundThe International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
External links
- Nouriel Roubini official website
- Economic Doom blog
- Who is Roubini?
- Nouriel Roubini at Stern School of Business, New York UniversityNew York UniversityNew York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
- Profile at Leigh Bureau
- Column archive at Project SyndicateProject SyndicateProject Syndicate is an international not-for-profit newspaper syndicate and association of newspapers. It distributes commentaries and analysis by experts, activists, Nobel laureates, statesmen, economists, political thinkers, business leaders and academics to its member publications, and...