Nothing like great piece of news from “Dr. Doom”… 2013 looks promising so far!

Here’s a quick review the macroeconomic dangers Dr. Doom Nouriel Roubini saw in his late January warning on “Prepare for a Perfect Storm.” Our world is a game of dominos, any one of which could put in motion a global economic, market and monetary collapse. Listen:

1. America: We’re still at the edge of a fiscal cliff and markets suffering

“Sooner or later, another ugly fight will take place on the debt ceiling … Markets may become spooked by another fiscal cliffhanger,” with “a significant amount of drag, about 1.4% of GDP, on an economy that has grown at barely a 2% rate” in recent quarters.

2. Euro zone: Stagnation, recession, austerity, credit crunch continue

Roubini warns: “The monetary union’s fundamental problems have not been resolved. Together with political uncertainty, they will re-emerge with full force … large and potentially unsustainable stocks of private and public debt remain.” Plus, “aging populations and low productivity growth” will be “eroded in the absence of more aggressive structural reforms to boost competitiveness.”

3. China: Bust in real estate, infrastructure, industry will accelerate

Chinese are relying “on another round of monetary, fiscal, and credit stimulus to prop up an unbalanced and unsustainable growth model based on excessive exports and fixed investment, high saving, and low consumption.” Their new leaders are conservative and “consumption as a share of GDP will not rise fast enough … So the risk of a hard landing” is rising rapidly.

4. Emerging markets: State capitalism is decelerating growth

Dr. Doom says the BRICs (Brazil, Russia, India, and China) are now experiencing declining growth: Their “state capitalism … is the heart of the problem.” He doubts they’ll “embrace reforms aimed at boosting the private sector’s role in economic growth.”

5. Global geopolitical risks: Oil importers face negative economic growth

“Arab Spring is turning into an Arab Winter.” The Middle East to “Afghanistan and Pakistan is socially, economically, and politically unstable … with Israel refusing “to accept a nuclear-armed Iran … the drums of actual war will beat harder. The fear premium in oil markets” will “increase oil prices by 20%, leading to negative growth” for all “advanced economies and emerging markets that are net oil importers.”

But hey, you can chill out for a second. Considering his wrong calls lately, there is nothing to be fearful about.

Happy 2013!


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4 Responses to Roubini’s Perfect Storm (again): US’ economy on the edge, BRICs’ declining growth, China’s bust, Euro’s stagnation, Arab’s oil spring

  1. Pedro says:

    I couldn’t find any mention of BRIC countries in the interview hosted on the website.
    Could someone please provide a link to the source.

    Thank you.

  2. Pedro says:

    Nevermind… I found it.

  3. Jack Ganoza says:

    Certainly global imbalances will persist, but China unequivocally will still run current account surpluses that not only will enable to fund other countries’ national debts (very likely the US again) but also increase FDI in other world economies.

    The crucial aspect to reckon is that China’s national investment rate levels will inexorably downscale. Chinese FDI will diversify into high-tech industries, pharmaceuticals, and knowledge-based industries, with high R&D.

    We will observe less Chinese investment in commodity-extracting endeavours, with the exception of the Oil and Gas sector.

    Roubini is accurate in depecting the global risks, but China will meet its challenge and be the engine of international growth again.

    Insofar as the Brazilian politicians realize that the need for structural reforms are necessary, there is a window of opportunity to gain from Chinese FDI.

    Easier said that done, in a country with archaic regulation, disdain for foreign capital, and an obtuse colonial minset that subjugates Brazilians and their institutions.

    We’ll have to wait. Unfortunately.

  4. Anglo says:

    Go the Blood Sucking Gringos

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