One week before the U.S. must lift its debt ceiling or risk default, Nouriel Roubini, the economist best known for predicting the global financial crisis, foresees no catastrophe as next Tuesday’s deadline approaches. Mark Mobius, best known for his emerging markets expertise, sees a blow to the dollar if the U.S. debt limit isn't raised.
Roubini, the New York University economist, speaking in Shanghai, China, was quoted as saying, “My baseline scenario is still an agreement will be reached. I don't think the U.S. will default."
What disturbs the economic forecaster’s peace is the high levels of debt that continue to slow down the world’s advanced economies. "(Recovery) has been so weak because this was not a traditional recession, but was a recession caused by a financial crisis brought on by too much debt and leverage first in the private sector and now in the public sector," MarketWatch quotes Roubini as saying.
While Roubini has doubtless shared his nuanced analysis with attendees at the Shanghai forum and with his consulting firm Roubini Global Economics’ private clients, a few of his fairly frequent public tweets give a condensed but clear idea of his proposed solutions to the longer-term U.S. debt crisis. The celebrity economist believes the U.S. needs to raise more revenue and seems to be at odds with Republicans opposed to tax increases.
“Almost no democracy has a debt ceiling. This US farce is nonsense. A decade of bipartisan deficits & tax cuts led us here Raise the ceiling!” Roubini tweeted Tuesday morning. In a tweet posted Monday, Roubini made it clear he considers tax cuts of the past ill-advised, and spelled out which tax increases he specifically recommends for the current budgetary impasse:
“Federal taxes were 20% of GDP at time of a balanced budget. Now down to 14% the lowest in 60yrs. So any deficit reduction requires tax hikes,” he tweeted.
Also speaking in Asia, another prominent voice in the financial world shared thoughts on the debt ceiling crisis. Templeton Asset Management Executive Chairman Mobius, best known for his emerging markets expertise, is quoted as saying a failure to raise the U.S. debt limit would be a blow to the dollar.
"Look at the dollar index during the subprime crisis. Everyone was rushing out of the dollar," South Africa’s Business Day quotes Mobius as saying. Presumably any ensuing dollar decline would be a boon to unspecified other currencies. Mobius is traveling in Manila Tuesday evaluating Asian investment opportunities.