Doctor Doom - Dr. Nouriel Roubini
I heard Dr. Roubini speak on the radio a few days ago and was impressed with his track record and ability to respond to difficult questions in an interview without the need of a TelePrompTer.
Dr. Roubini predicted the current financial meltdown back in 2006 and gave details of how it would go down - prescient details it turns out.
The New York Times did a
nice three-page article about him last fall:
Dr. Doom
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 Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
I love that line about: "he noted that Roubini’s predictions did not make
use of mathematical models and dismissed his hunches as those of a career naysayer"
Now what other line of work uses mathematical models to influence political action? Anyone? Anyone? Bueller? I love that the Global Warming scientists cannot take the data of the last 200 years and produce a model that will accurately hindcast the weather patterns.
Back to the story -- here is another excerpt, talking about models:
“When I weigh evidence,” he told me, “I’m drawing on 20 years of accumulated experience using models” — but his approach is not the contemporary scholarly ideal in which an economist builds a model in order to constrain his subjective impressions and abide by a discrete set of data. As Shiller told me, “Nouriel has a different way of seeing things than most economists: he gets into everything.”
His thoughts on the ultimate size of this recession:
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 Roubini’s 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.”
Here is his
website and his
blog.
Some interesting thoughts -- it is good to have a small business right now. People have to eat and we are seeing a large uptick in food stamps and WIC checks. The local community garden is booked solid and people are eating off their produce -- nice to see!
It is time for a sweeping change in Washington...
Posted by DaveH at June 18, 2009 8:00 PM
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