Economist Nouriel Roubini said that worries last week that the world is in for another financial crisis were based on indicators that such a crisis was on its way. He added that his data indicate that most advanced economies are already descending into recession.
In an extensive Friday interview on EmergingMarkets.org, Roubini was asked about market fears of another global financial crisis. He replied that, in his opinion, “there is a high likelihood that there is going to be another global financial crisis.” His financial data, he added, suggested that “most advanced economies are already entering a recession.”
Three factors pointed to a global crisis to come. The first was the current state of the economies of the euro zone, the U.S., and the U.K. He was quoted saying, “We’re not any more in an anemic recovery, we’re not any more at stall speed. We’re at the beginning of a contraction.” The second factor, he explained, was a lack of “policy bullets” to shore up the financial system. The third was the euro zone as a source of systemic risk, extending far beyond Greece and even Ireland and Portugal. “If there is a disorderly situation in the eurozone,” he warned, “it’s going to be worse than Lehman.”
Asked what could be done to cut down on the damage from such a scenario, Roubini cited an eight-point paper he had recently released, previously reported by AdvisorOne, which called for a number of strategies that he said should be used to avoid disaster. However, he added that he doubted the political willingness of politicians to carry them out, either at home or abroad. Political gridlock ruled over any implementation of possible solutions, and “I don’t think we’re going to get there.”