Nouriel Roubini

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Nouriel Roubini
Keynesian economics
Birth March 29, 1959 (1959-03-29) (age 50)
Istanbul, Turkey
Nationality Turkey, United States
Field International economics
Influences John Maynard Keynes, Hyman Minsky, Larry Summers, Jeffrey Sachs

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 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 wrote of him, "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 announced to a skeptical IMF that an economic crisis was brewing. "In the coming months and years, he warned, 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," according to the New York Times.[2] According to the Times, he accurately foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt." The NY Times even labeled him "Dr. Doom." In hindsight, IMF economist Prakash Loungani has called him "a prophet,"[2] and the vice chairman of AIG said "Roubini was intellectually courageous, and he called the shots correctly."

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. 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. Having become a sought-after adviser, he spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia."[2]

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 doctorate in international economics at Harvard University.[2] He is currently a U.S. citizen and speaks English, Persian, 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 on 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.[5] (In 2009 Geithner became the Treasury Secretary in the Obama Administration).

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 global consulting firm, which now employs two dozen economists and publishes a popular Web site and blog. "Nouriel has a rare combination of economics and the real world, and so has great insight because of that," said economist Robert Shiller. "He looks into the details and rolls up his sleeves."[5]

[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] 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] Economic forecaster

At the end of January 2009, Roubini returned to the annual World Economic Forum in Davos, Switzerland, as "the prophet of the worst economic and financial crisis since the Great Depression." He had warned, in the same forum two years earlier, that record profits and bonuses were obscuring a "hard landing" to come. "I really disagree," countered Jacob Frenkel, the American International Group Inc. vice chairman and former Israeli central banker. "No more," said Bloomberg.com. "Roubini was intellectually courageous, and he called the shots correctly," said Frenkel, whose AIG survives only on the basis of more than $100 billion of government loans. "He gained credibility, and he deserves it."[5]

He similarly forecast a financial crisis in his presentation at the IMF in 2006, where he was likewise received skeptically, with one commentator noting his lack of mathematical models. By the end of 2008, however, most of his predictions had come true with his descriptions of the recession's causes and effects proving accurate. Formerly an obscure academic, he has received invitations to speak before influential organizations such as United States Congress and the Council on Foreign Relations. He is in demand around the world as a macroeconomist. The Financial Times writes that "Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis."[7]

Business Week magazine writer Michael Mandel noted that Roubini and other economists often make general predictions which could happen over multi-year periods.[8]

In the 1990s, Roubini studied the collapse of emerging economies. Consistent with his unusual talent, noted by Harvard economist Jeffrey Sachs, 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]

[edit] Real estate predictions

Roubini's predictions are generally based on historic fundamentals. 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." 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]

[edit] Recent predictions

As of January 2009, he remains pessimistic about the US and global economy. He said in September, 2008, "we have a subprime financial system, not a subprime mortgage market".[10] And while he does not believe that the United States is at risk of another Great Depression, he expects it to be the worst recession since the 1940s. Looking at the global picture, he writes, "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."[11] He was quoted in South Africa's 2009 budget speech for his role in predicting the current financial crisis in the developed markets.

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". In conclusion, he adds, "This will be a painful year. Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be."[11]

Banking insolvency

At a conference in Dubai on January 20, 2009, he said, "I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers. If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.... The problems of Citi, Bank of America and others suggest the system is bankrupt. In Europe, it’s the same thing."[12]

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."[13] This suggestion has been considered radical, the Wall Street Journal adding, "The man has instant impact on public debate. An idea he floated only last week -- that our 'zombie banks' be temporarily nationalized ... has evolved, in the space of just a few days, from radical solution to almost received wisdom."[14]

In March 2009, Roubini updated his prediction of the U.S. Economy to saying the downturn will likely be 24- or 36-months long with a possibility of the sort of L-shaped recovery that Japan went through in The Lost Decade.[15]

[edit] Writings

Professor Roubini is the author of several books, including: Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies,[16] Political Cycles and the Macroeconomy,[17] and New International Financial Architecture.[18]

[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 c d "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. ^ Interview, Sunday Times, October 26, 2008"I fear the worst is yet to come - an interview with Professor Roubini"
  8. ^ March 21, 2006"The Problem With Prediction Registries"
  9. ^ "The Descent", New York Magazine, Sept. 24, 2006
  10. ^ "Bailout: No cure for recession", CNN Money, Sept. 24, 2008
  11. ^ a b Roubini, Nouriel. Warning: More Doom Ahead Foreign Policy, January/February, 2009
  12. ^ Roubini Predicts U.S. Losses May Reach $3.6 Trillion Bloomberg News, January 20, 2009
  13. ^ "Roubini Sees More Economic Gloom Ahead", Time, March 3, 2009
  14. ^ "'Nationalize' the Banks" Wall Street Journal, Feb. 21, 2009
  15. ^ Bloomberg.com: Roubini Says Recession May Continue Until End of 2010 (Update1) by By Cherian Thomas; Last Updated: March 6, 2009 09:49 EST
  16. ^ Roubini, Nouriel; Setzer, Brad (August 2004). Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Economies. Peterson Institute. ISBN 0881323713. 
  17. ^ Alesina, Alberto; Roubini, Nouriel; Cohen, Gerald D. (1997-11-14). Political Cycles and the Macroeconomy. The MIT Press. ISBN 0262510944. 
  18. ^ 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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