Nouriel Roubini

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Nouriel Roubini
New Keynesian economics
Birth March 29, 1959 (1959-03-29) (age 50)
Istanbul, Turkey
Nationality  Turkey
 United States
Institution New York University
Field International economics
Alma mater Bocconi University
Harvard University
Influences John Maynard Keynes
Hyman Minsky
Larry Summers
Jeffrey Sachs
Information at IDEAS/RePEc

Nouriel Roubini (born on March 29, 1959) is a professor of economics at the Stern School of Business, New York University and chairman of RGE Monitor, an economic consultancy firm. After receiving his B.A. in Political Economics from Bocconi University and his doctorate in international economics from Harvard University, he began academic research and policy-making by teaching at Yale while also spending time at the International Monetary Fund (IMF), the Federal Reserve, World Bank and Bank of Israel. Much of his early studies were focused on emerging-market countries. During President Bill Clinton’s administration he was a senior economist for the Council of Economic Advisers later moving to the United States Treasury Department as a senior adviser to Timothy Geithner who is now Treasury Secretary.

Fortune magazine, in 2008, wrote that "in 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage."[1] In September, 2006, he warned to a skeptical IMF that "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."[2] He also foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt." The New York Times labeled him "Dr. Doom." In hindsight, IMF economist Prakash Loungani has called him "a prophet."[2]

Because his descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy and spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia."[2]. Although he is ranked only 410th in terms of lifetime academic citations,[3] Prospect Magazine in January, 2009, voted him #2 on its "list of the world’s 100 greatest living public intellectuals."[4] He has recently appeared before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. He was recently named "Bocconiano dell'Anno", the most important Alumni award of Bocconi University.

Contents

[edit] Early life and education

Nouriel Roubini was born in Istanbul, Turkey, on March 29, 1959. The child of Iranian Jewish parents, his family moved to Tehran, Iran, when he was two. He later lived in Israel and Italy to attend college and moved to the United States to pursue his business doctorate in international economics at Harvard University.[2] He is currently a U.S. citizen and speaks English, Farsi, Italian, and Hebrew. He has never married.

Roubini spent one year at the Hebrew University of Jerusalem before moving to Italy and receiving his B.A., summa cum laude, in Economics from the Bocconi University (Milan) in 1982. He received his Ph.D. in international economics from Harvard University in 1988. According to his academic advisor, Jeffrey Sachs, he was unusual in his talent with both mathematics and intuitive understanding of economic institutions.[2]

[edit] Career

For much of the 1990s, Roubini combined academic research and policy-making by teaching at Yale and then in New York, while also spending time at the International Monetary Fund, the Federal Reserve, World Bank and Bank of Israel. Currently, he is a professor at the Stern School of Business at New York University. He spent much of his time working on emerging-market blowouts in Asia and Latin America which helped him spot the looming disaster in the U.S. "I’ve been studying emerging markets for 20 years, and saw the same signs in the U.S. that I saw in them, which was that we were in a massive credit bubble," he said.[5]

By 1998 he had attracted the attention of President Bill Clinton’s administration, joining it first as a senior economist in the White House Council of Economic Advisers and then moving to the Treasury department as a senior adviser to Timothy Geithner, then the undersecretary for international affairs and now Treasury secretary in the Obama administration. [5].

Roubini returned to the IMF in 2001 as a visiting scholar while it battled a financial meltdown in Argentina. He co-wrote a book on saving bankrupt economies entitled Bailouts or Bail-ins? and opened his own consulting firm.

[edit] Role models

He credits a number of economists for his understanding of economics. He said, "One person who has had a great impact on me intellectually was my adviser at Harvard, Jeffrey Sachs. For me he’s the model of a great intellectual. He is both a rigorous academic and very human, involved in big picture issues such as poverty, AIDS, and Africa. He’s someone with a great mind that is also very engaged with the world. Another intellectual hero is Larry Summers, the former President of Harvard, an amazing intellectual and academic, who is very deeply involved with the policy world. I worked for him for many years in the US Treasury during the Clinton Administration".[6]

[edit] Global nomad

He likes to refer to himself as a "global nomad", and says, "You can be sitting still surfing the Internet, and experience other worlds, ideas and societies. But I’ve found that there is nothing better than visiting a different country, even if for three days. ... you can’t only be a virtual Global Nomad, with goggles on, in a virtual reality. You have to be there. You have to see it, smell it and live it. You have to see people, travel, and interact."[6]

Partly to fulfill this need, he became chairman of RGE Monitor, an economic consultancy for financial analysis. In describing the purpose of RGE Monitor, he said, "the world is my home, so everything about society and culture — no matter how miniscule [sic] — is worth knowing. I am an information junkie and created RGE Monitor to collect information about what’s happening around the world."[6]

He said, "I was born into a relatively orthodox Jewish family in Iran, lived in Israel and Turkey, and then moved to Italy as a child. By the age of six, instead of going to a yeshiva, I went to a secular Jewish school where I interacted with kids from all sorts of different backgrounds. Had I gone to an orthodox Jewish school, I would perhaps be orthodox now and may have never become a Global Nomad."[6]

[edit] Economic forecaster

[edit] U.S. economy

In the 1990s, Roubini studied the collapse of emerging economies. He used an intuitive, historical approach backed up by an understanding of theoretical models to analyze these countries and came to the conclusion that a common denominator was the large current account deficits financed by loans from abroad. Roubini theorized that the United States might be the next to suffer, and as early as 2004 began writing about a possible future collapse.[2] Business Week magazine writer Michael Mandel, however, noted in 2006 that Roubini and other economists often make general predictions which could happen over multi-year periods.[7]

In September 2006, he clearly saw the end of the real estate bubble: "When supply increases, prices fall: That’s been the trend for 110 years, since 1890. But since 1997, real home prices have increased by about 90 percent. There is no economic fundamental—real income, migration, interest rates, demographics—that can explain this. It means there was a speculative bubble. And now that bubble is bursting." In the Spring 2006 issue of International Finance, he wrote an article titled "Why Central Banks Should Burst Bubbles" [8] in which he argued that central banks should take action against asset bubbles. When asked whether the real estate ride was over, he said, "Not only is it over, it’s going to be a nasty fall."[9]

By May 2009, he felt that analysts expecting the U.S. economy to rebound in the third and fourth quarter were "too optimistic." He stated, "Certainly the rate of economic contraction is slowing down from the freefall of the last two quarters." He expects negative growth to the end of 2009, and feels that during 2010 the recovery is still going to be weak,"[10] with the full recession lasting 24 or 36 months, and a possibility of an "L-shaped" slow recovery that Japan went through in The Lost Decade.[11]

In his opinion, much of the current recession's cause is due to "boom-and-bust cycles," and feels the U.S. economy needs to find a different growth path in the future. "We’ve been growing through a period of time of repeated big bubbles," he said. "We’ve had a model of 'growth' based on overconsumption and lack of savings. And now that model has broken down because we borrowed too much." He feels that too much human capital went into financing the "most unproductive form of capital, meaning housing" and would like to see America create a model of growth in more-productive activities. He feels that "sustainable growth may mean investing slowly in infrastructures for the future, and rebuilding our human capital," by investing in renewable resources. "We don’t know what it’s going to be," he says, "but it’s going to be a challenge to find a new growth model. It’s not going to be simple."[12]

Recovery from recession

According to Roubini, the Fed is "now embarked on a policy in which they are in effect directly monetizing about half of the budget deficit." He stated in late spring 2009, that "the public debt is going up, and the federal government is covering about half of that total by printing new money and sending it to banks." He points out that as of now "monetization is not inflationary," as banks are holding much of the money themselves and not relending it. However, he notes that at some point, probably by 2011, the recession will end, and "banks will want to lend the money; people and businesses will want to borrow and spend it." Then it will be time for what Roubini calls "the exit strategy, of mopping up that liquidity" and taking some of the money back out of circulation, "so it doesn’t just bid up house prices and stock values in a new bubble. And that will be 'very, very tricky indeed,'" he states.[12]

[edit] Global economy

As of January 2009, he remained pessimistic about the U.S. and global economy. He said in September, 2008, "we have a subprime financial system, not a subprime mortgage market".[13] "As the U.S. economy shrinks, the entire global economy will go into recession. In Europe, Canada, Japan, and the other advanced economies, it will be severe. Nor will emerging market economies—linked to the developed world by trade in goods, finance, and currency—escape real pain."[14] He was quoted in South Africa's 2009 budget speech for his role in predicting the current financial crisis in the developed markets.

Roubini notes that the subprime issues are a global, and not just a U.S. problem. In an interview with author James Fallows in late spring of 2009, he stated, "People talk about the American subprime problem, but there were housing bubbles in the U.K., in Spain, in Ireland, in Iceland, in a large part of emerging Europe, like the Baltics all the way to Hungary and the Balkans. It was not just the U.S., and not just 'subprime.' It was excesses that led to the risk of a tipping point in many different economies."[12]

His pessimism is focused on the short-run rather than the medium or long-run.[2] In Foreign Policy (Jan/Feb 2009), he writes, "Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst". "[14]

At a conference in Dubai in January, 2009, he said, the U.S. banking system was "effectively insolvent." He added that the "systemic banking crisis.... The problems of Citi, Bank of America and others suggest the system is bankrupt. In Europe, it’s the same thing."[15] To deal with this problem, he recommends that the U.S. government "do triage between banks that are illiquid and undercapitalized but solvent, and those that are insolvent. The insolvent ones you have to shut down." He adds, "We're in a war economy. You need command-economy allocation of credit to the real economy. Not enough is being done," he felt at the time.[16]

China

Roubini met officials in China during spring 2009, and points out that many Chinese commentators blame American "overborrowing and excess" for dragging them into a recession. However, he states that "even they realize that the very excess of American demand has created a market for Chinese exports." He adds that although Chinese leaders "would love to be less dependent on American customers and hate having so many of their nation’s foreign assets tied up in U.S. dollars," they’re now "more worried about keeping Chinese exporters in business. . . . I don’t think even the Chinese authorities have fully internalized the contradictions of their position."[12]

[edit] Writings

Professor Roubini is the author of several books, including: Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies,[17] Political Cycles and the Macroeconomy,[18] and New International Financial Architecture.[19]

[edit] Research

Professor Roubini's research interests include:

  • international macroeconomics and international finance;
  • macroeconomics and fiscal policy;
  • political economy;
  • growth theory;
  • European monetary issues.

[edit] Current appointments

[edit] Notes

  1. ^ "Eight Who Saw it Coming" Fortune, Aug. 2008
  2. ^ a b c d e f g Mihm, Stephen (August 15, 2008). "Dr. Doom". New York Times. http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html. 
  3. ^ Ideas
  4. ^ Crabtree, James. Chosen #2 of world's 100 greatest living intellectuals, Prospect Magazine, January, 2009
  5. ^ a b "Roubini Sees Global Gloom After Davos Vindication", Bloomberg TV, January 30, 2009
  6. ^ a b c d >"Talking to Nouriel Roubini", Janera Magazine, May 2, 2007
  7. ^ March 21, 2006"The Problem With Prediction Registries"
  8. ^ Article Abstract, International Finance, Spring 2006
  9. ^ "The Descent", New York Magazine, Sept. 24, 2006
  10. ^ "Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says" Bloomberg, May 7, 2009
  11. ^ "Roubini Says Recession May Continue Until End of 2010" Bloomberg, March 6, 2009
  12. ^ a b c d Fallows, James. "Dr. Doom Has Some Good News", The Atlantic magazine, July/August, 2009
  13. ^ "Bailout: No cure for recession", CNN Money, Sept. 24, 2008
  14. ^ a b Roubini, Nouriel. Warning: More Doom Ahead Foreign Policy, January/February, 2009
  15. ^ "Roubini Predicts U.S. Losses May Reach $3.6 Trillion" Bloomberg News, January 20, 2009
  16. ^ "Roubini Sees More Economic Gloom Ahead", Time, March 3, 2009
  17. ^ Roubini, Nouriel; Setzer, Brad (August 2004). Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Economies. Peterson Institute. ISBN 0881323713. 
  18. ^ Alesina, Alberto; Roubini, Nouriel; Cohen, Gerald D. (1997-11-14). Political Cycles and the Macroeconomy. The MIT Press. ISBN 0262510944. 
  19. ^ Roubini, Nouriel (ed.); Uzan, Marc (ed.) (2006-02-28). New International Financial Architecture. Edward Elgar Publishing. ISBN 978-1-84376-808-1. 

[edit] External links

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