Economist Nouriel 'Dr. Doom' Roubini Again Lives Up to Nickname

Nouriel Roubini, the New York University economics professor also known as Dr. Doom for his dire predictions about the economy, remained true to his identity when he tweeted Wednesday that the chances of a "double dip" recession are now more than 40%. In an interview with CNBC (GE) this morning Roubini explained his reasoning, saying that not only the second half of 2010 be worse than the first half, but that the government and the Federal Reserve are out of policy moves to stimulate the economy.

Like many economists, Roubini predicts that second-quarter gross domestic product growth will be revised down to an a annual rate of 1.2% from an initial reading of 2.4%. Additionally, a "series of tailwinds in the first half of the year ... are going to be essentially headwinds" in the second half, like the inventory adjustments which has run its course. The fiscal stimulus will actually become a drag on growth in the second half.

For example, the employment boost from the census survey will disappear, as will several tax credits and other policies, such as the cash-for-clunkers car trading program, the first-time homebuyer's tax credits, and cash for green appliances. These were all temporary. Therefore, growth for the rest of the year will be closer to zero than 1%, Roubini predicted.

This Year More Troubling Than Last?

What's perhaps even more discouraging is that the policy outlook looks worse than before. Last year, when economy was in free fall, the Fed pushed interest rates to zero, and the government initiated a 10% of GDP fiscal stimulus of $800 billion. Oh, and billions more went toward avoiding a complete collapse of the financial industry.

One sign of the downshifting of policy ambitions: Last year lawmakers approved that $800 billion stimulus; this year they're debating over a mere $20 million aid for unemployment.

Similarly, from a monetary policy perspective, the scenario is worse than last year, Roubini said. "Banks today are sitting on $1 trillion of excess reserves that they are not lending out" and on which they are earning 0.25%. The U.S. is facing a "liquidity trap," Roubini said.

Now, with companies discounting prices and a glut in the labor market, the biggest threat to the economy is deflation. On this score Dr. Doom has more ... gloom to offer: "In the short run we may end up like Japan in a severe deflationary trap."

Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Add a Comment

*0 / 3000 Character Maximum

227 Comments

Filter by:
jrp1947

Republican or Democrat it does not matter. Your party has been screwing you for the last two decades big time to the benefit of their rich friends on Wall Street. Who is going to pick up the tax and debt bill when they get through LEGALLY signing your financial life away? You are because you are going to be slaves to the tax system and paying ever increasing taxes at all level. Just stop and actually add up how much you pay in taxes every year whether it is income, sales, highway at the gas pump, house, etc all the way from the city to the county to the state to the federal government. By the time you add up what they take away from you in your paycheck and then add on everything else more than half of your income is going to pay one tax or another whether it comes out of your pocket after you cash your check and buy something or before that check even gets to you. The American public is the biggest bunch of fools on the planet and the maybe it is about time you look at who is really to blame. Your congressmen adn every official you elected who votes on tax issues of any kind. I'll bet you are paying more and the quality of life is not going up any is it? the biggest welfare system in the world are our own public officials. Get mad and use the ballot box this fall and change things.

August 28 2010 at 12:04 AM Report abuse rate up rate down Reply
a6intrude

Ok, this is a simple fix from my point of view. There a lot of jobs out there, granted they may not be what the people who are out of work had before, but they are there. I remember doing many jobs, in some cases three different ones one full and two part time on different days, to support my family till I got a solid job with a local uility company. The bottom line is you have to take what you can and work your way back up. You can't support your family on jobless benny's forever. This final though for everyone who thinks you're owned something. "The world doesn't own you a thing, you want it you work for it." Live with in your means and you'll be OK

August 27 2010 at 10:20 AM Report abuse +7 rate up rate down Reply
CHABSENTIA

As somebody who is retired asnd has been investing for over thirty years it never ceases to amaze me that some people dont have a clue. First of all, the Democrats have been the majority party in both Houses since January 20, 2007 and since Congress enacts the legislation or prevents it from being enacted and approves the Budget then what have the Democrats in four years of Power and this Administration done in twenty months? People need to educate themselves. In the last quarter of 2009 the Econonmy was growing at 5%. In the First Quarter of 2010 it was growing at 3%. In the second quarter of 2010 it was 2% and if Roubini is correct and I would bet on it then it will be about 1.2%. A twelve year old knows that it is getting worse. The Government doues not report you as being unemployed unless you ae unemplyed and have actively been looking for work in the last four weeks. Count all the unemployed and it has been 17% since August 2009. Finally this economy is the result of three bubbles. The Stock market which increased twn fold from 1982-2000. Before 1999 in order to buy a home and get a Federal Loan Guaranty one had to out 20% down and their monthly debt payments including their mortgage couldnt be more than 25% of their monthly income. This all changed in 1999 when Clinton revived the Commununity Reinvestment act which Carter had started and Reagan had repeaed .Remeber Carter and the Policies that brought 18% Interest rates? From 2000-2007 Housing values increased 100% because of these people buying homes they couldnt afford and creating this artificial demand. Anybody that believes that a 100% rise in Housing values in a seven year period is normal is an Idiot. Yet these same idioits are blaming Bush and the conservatives thst werent around from 1982-2000 nor 1999 etc. These same ignorant people calim they are smarter than soemebody as educated as Roubini that was one of the few to predict this mess. I only have a double degree in Business Admin and Accounting and by the way I have been a Registered Democrat for 30 years and have the Registration card to prove it.I will bet anybody that can figure out a way to put the money in safe escrow any amount of money on it. The third bubble was the Personal debt bubble where people took out Loans they couldnt pay back and used the equity in their homes to make purchases they couldnt afford belieiving home values would contiue to rise and started in the mid eighties and would have been correct until 1999 when idiots were allowed to buy homes they couldnt afford. The deficit didnt affect my success one way or the other or any orher repsonsible person that planned ahead and was smart enough to see the trends. Anybody thst falls for this George Bush nonsense in light of the above deserves to be unemloyed and hungry.

August 27 2010 at 10:18 AM Report abuse +3 rate up rate down Reply
capallrua1

He may be Dr. Doom, but the guy is also "Dr. Accurate." At least he tells us the truth- this may be yet another teachable moment for the president and his motley crew. Maybe folks like like Biden who tell us how great things are and will continue to be, will wake up. I guess when we go into a full depression, they can always blame old Bush right? Hey Joe, go have a couple of beers and leave us all alone for awhile already.

August 27 2010 at 10:13 AM Report abuse +7 rate up rate down Reply
B INSANE OBOZO

what? obozo is making things worse???? say it ain't so!!!! more people (population for dummytards) than in 1929 making this depression worse. how's that hopey changey thing working out for you America? This is what socialism is all about.... they're not happy until you're not happy.

August 27 2010 at 10:09 AM Report abuse +4 rate up rate down Reply
cb529

Republican party, I like to have people LQQK once at history Carter, had to redo Nixon’s disaster, Clinton, had to redo the Regan/Bush dilemma, now we need Obama to redo ANOTHER Bush, Disaster., these disasters took 8 years to create, and you think it can be redone in a few years Health care reform: The Republican’s with their “Fear Factor” tactics, whine out the phrase, we need to get this spending under control, well, for the first 6 years of Georgies term, we went from a 3 Trillion dollar surplus to a 10 trillion dollar to the negative, and that comes to a 13 trillion dollar spending spree, and nothing to show for it ( in which no bill was vetoed in them 6 years of Republican controlled Congress ), except, 4k + lives lost, and Obama wants to spend, 1 trillion over a 10 year period, for health care and we’ll have something to show for our tax money! Reform, needs to happen to the better, here is One story, My ex-wife died on 4-20-09 at age 45, cause she could not get her drugs to stay alive, which cost 100 dollars per day, she had a BA and couldn’t get a job nor insurance, she had a pre-existing condition, called PBC, and genetic disease, she had a liver transplant in 2000, you might think your insurance is fine and dandy as we speak, but at some point ( Hopefully not ) you’ll or someone close to will lose everything they worked for in life to that point, do to a medical condition, and more than likely go bankrupt! Health care has gone up 32% in the past 5 years, what has your cost of living gone up?

August 27 2010 at 9:51 AM Report abuse -8 rate up rate down Reply
John L

What the Government fails to recognize is that the unions sucked the life out of the stimulus ! Much of the money went to people who ALREADY have jobs ! Teacher, fire and police RAISES, took the money and drove up property taxes, which is what is making the population feel so uneasy ! If they doubled the work force for half the money, people would not be so troubled ! But Raises ? Stop the madness and pass a Government wage freeze !!

August 27 2010 at 9:49 AM Report abuse +8 rate up rate down Reply
m47ghr

It never ceases to amaze me the level of ignorance and stupidity of the conservative sheep on here who pontificate their BS and blame Obama for all the economic mess. The fact that idiot king george destroyed a budget surplus in record time, started and left us with 2 wars.. which were funded off budget.. not to mention the trillions of dollars spent that we have no clue about... and all but decimated our civil, consitution rights so he can play cowboy and blame the so called enemies of America. There is a cure for ignorance.. it is called education. It is called learning the truth and learning to think for yourself, formulating clear and correct opinions based on fact.. not fiction, not BULLSHIT. Stupidity on the other hand has no cure. I guess that sucks for you.

August 27 2010 at 9:45 AM Report abuse -7 rate up rate down Reply
jpjgamas

Obama is too busy making all illegals American citizens/Dem voters to realize that by doing so he is spiraling down the incomes of real Americans. The Unions are increasing their members incomes and as a result either the product they prduce will be over priced for the U.S. market or the international markets. With incomes spiraling downward the U.S. will be just another overburdened debt nation paralized by its' inability to correct the momentum. Obama won't be able to fix this by thowing fake stimulus money around. He will have to end the welfare mentality that has permeated our socity and force states/people to live within their means.

August 27 2010 at 9:45 AM Report abuse +5 rate up rate down Reply
raspberries0

This 'Summer of Recovery' tour is really just cloaking 0bama's campaigning for Dem candidates and is an insult to everyday Americans. He really DOES think we are all as stupid as those who voted for him. Resign 0bama -- at least Biden is honest some of the time.

August 27 2010 at 8:52 AM Report abuse +4 rate up rate down Reply