Epsilon Delta
Jedi Master
This guy's been getting quite a buzz for having 'predicted' the financial crisis two years ago, and some of the stuff he's saying now is pretty interesting. Thought others would be interested as well.
http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?pagewanted=1&_r=1
And here's the latest Charlie Rose interview. It's only about 9 minutes long and worth checking out:
A conversation with Nouriel Roubini - Charlie Rose
http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?pagewanted=1&_r=1
New York Times said:On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, 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. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.
The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, I think perhaps we will need a stiff drink after that. People laughed and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a permabear. When the economist Anirvan Banerji delivered his response to Roubinis talk, he noted that Roubinis predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
But Roubini was soon vindicated. In the year that followed, subprime lenders began entering bankruptcy, hedge funds began going under and the stock market plunged. [...]
In February, when the conventional wisdom held that the venerable investment firms of Wall Street would weather the crisis, Roubini warned that one or more of them would go belly up and six weeks later, Bear Stearns collapsed. Following the Feds further extraordinary actions in the spring including making lines of credit available to selected investment banks and brokerage houses many economists made note of the ensuing economic rally and proclaimed the credit crisis over and a recession averted. Roubini, who dismissed the rally as nothing more than a delusional complacency encouraged by a bunch of self-serving spinmasters, stuck to his script of nightmare events. [...] As a result, Roubini, a respected but formerly obscure academic, has become a major figure in the public debate about the economy: the seer who saw it coming. He has been summoned to speak before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. He is now a sought-after adviser, spending much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. [...]
Roubini was unnerved by what he saw in the U.S. economy, in particular its 2004 current-account deficit of $600 billion. He began writing extensively about the dangers of that deficit and then branched out, researching the various effects of the credit boom including the biggest housing bubble in the nations history that began after the Federal Reserve cut rates to close to zero in 2003. Roubini became convinced that the housing bubble was going to pop. [...]
For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd but something between a trillion and a trillion and a half dollars. But most important, in Roubinis opinion, is to realize that the problem is deeper than the housing crisis. Reckless people have deluded themselves that this was a subprime crisis, he told me. But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts. All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. We have a subprime financial system, he said, not a subprime mortgage market. [...]
The United States, Roubini went on, will likely muddle through the crisis but will emerge from it a different nation, with a different place in the world. Once you run current-account deficits, you depend on the kindness of strangers, he said, pausing to let out a resigned sigh. This might be the beginning of the end of the American empire.
And here's the latest Charlie Rose interview. It's only about 9 minutes long and worth checking out:
A conversation with Nouriel Roubini - Charlie Rose