Summary: In this July 7 interview on Bloomberg TV, Nouriel Roubini tells us how our folly has brought us to the brink of another economic downturn. Perhaps worse than the crash in Winter 2008, since we’re in many ways weaker than we were then. We’ve wasted the time bought us by the fiscal and monetary stimulus programs. Readers of the FM website have heard all this before. See the links at the end for more information.
Excerpt (transcript from Zero Hedge):
There are more conflicts of interest today than four years ago. The banks that were too big to fail and now they are even bigger. Things are worse – not better.
… Nothing has changed since the financial crisis. The incentives of the banks is to cheat – doing things that are either illegal or immoral. The only way to avoid that is to break up these financial supermarkets. There are no chinese walls and massive conflicts of interest.
… There should be criminal sanctions. Nobody has gone to jail since the financial crisis. The banks, they do things that are illegal and at best they slap on them a fine. If some people end up in jail, maybe that will teach a lesson to somebody. Or somebody hanging in the streets.
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… By 2013, the ability of policy makers to kick the can down the road is going to run out of steam, and in the euro zone the slow motion train wreck will become a fast motion train wreck. The US seems close to stall-speed and an economic recession. The landing of China is becoming harder and EM nations (and BRICs) are sharply slowing down. And finally the potential for war between Israel, the US, and Iran – which will double oil prices overnight.
… Worse because like 2008 you will have an economic and financial crisis but unlike 2008, you are running out of policy bullets. In 2008, you could cut rates; do QE1, QE2; you could do fiscal stimulus; you could backstop/ringfence/guarantee banks and everybody else. Today, more QEs are becoming less and less effective because the problems are of solvency not liquidity. Fiscal deficits are already so large and you cannot bail out the banks because 1) there is a political opposition to it; and 2) governments are near-insolvent – they cannot bailout themselves let alone their banks. The problem is that we are running out of policy rabbits to pull out of the hat!
More by Roubini about the state of the world economy
- A Global Perfect Storm15 June 2012
- Berlin Is Ignoring the Lessons of the 1930s, 11 June 2012
- Time to Blackball Russia’s Autocratic State, 29 May 2012
Posts about the world economy
- The end of the post-WWII world is not the end of the world, 21 May 2012
- The unseen but perhaps decisive grand alignment of the nations!, 22 May 2012
- Which nations will make wise decisions under stress? Who will screw-up and fail?, 23 May 2012
- The global economy is sitting on a volcano. What happens next?, 1 June 2012
- It’s the end of the world we’ve known since WWII (updated status report), 29 June 2012
Posts about the US economy
- A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012
- About America’s economic recovery: the good news and the bad, 1 May 2012
- About the May jobs report – a few new jobs, bought at great cost, 1 June 2012
- The Titanic’s lessons for us about the coming economic crisis, 4 June 2012
- America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
- US economic update. Everything that follows is a result of what you see here., 8 June 2012
- Three important things to know about today’s employment report, 6 July 2012