Nouriel Roubini: Stimulus Exit Must Be Carefully Timed To Prevent Second Downturn (VIDEO)

In an interview from Davos today, economist Nouriel Roubini told Bloomberg Television that the global economy could endure a second recession if governments withdraw too quickly from their stimulus policies.

But extending the stimulus too long is also dangerous, Roubini predicted, and could run up the deficit, lead to inflation and ultimately end in a "fiscal train wreck":

"My main scenario is one of a U-shaped economic recovery rather than a double-dip W, so I see the high probability of a slow recovery in advanced economies. But I also see risk of a double-dip rising, especially if there's a policy mistake like exiting too soon from the stimulus, or exiting too late, so that's a tough choice for policymakers."

Roubini said he is confident that policymakers in the U.S. won't end their stimulus policy too quickly. But he fears the risk of an early exit in the Eurozone, where monetary policy has been tighter.

And he indicated that the global recovery hinges in large part on how and when China withdraws from its stimulus. If China tightens too much, Roubini said, "there's going to be a market correction throughout Asia and also in other parts of the world."

Here's the full interview:

Comments

[CoronaDischarge]

07:57 PM on 01/27/2010

Roubini always sees a recession coming. He merely proves the adage that a stopped clock is occasionally right. In fact I'd worry if I heard he was getting bullish.

[TJCole]

04:34 PM on 01/27/2010

That's what our bankers and their International cohorts want a Full Scale Depression to finally drive wages down below any reasonable living standard a return to the good ole days pre-Roosevelt, pre New Deal, what's the good of them being obscenely rich, if the rest aren't miserable...?

[Jimboy17]

04:47 PM on 01/27/2010

Hammer, nail, head!

[ntmessage]

04:18 PM on 01/27/2010

One of the few times I have agree with Roubini, at least for what he says in public. Real inflation is so far away we could almost double the prices of most assets and just get back to where we were before the crash. The people that are shilling hysterically about hyper inflation are even more delusional, and really do want the Fed to make a policy mistake, mostly to get the GOP back in power I would suspect or to discourage investment in the United States.

Lastly, we already know how to stop inflation; it is deflation, what we have today, that is a much harder thing to fix.

[Dnlmsstch]

05:01 PM on 01/27/2010

I agree - but would add that we know how to solve defaltion FDR style public works and jobs if we wanted to we could get the unemployment rate back to 2.5 percent with massive public works (or even cheap loans directly to citizens - like we did to 15 million Gis = 10% of us pop at the time after WW2)

Explode the deficit now and tax the hell of the wealthy after the economy recover (Ike tax rates) to pay it back

but for that we need FDR not obama

[ntmessage]

06:23 PM on 01/27/2010

Yes I agree on public projects, but this congress already exploded the debt and is trying to tax the hell out of the wealthy as you put it. It does not work if you are just dig holes and filling them back in. The problem is that the Trillion Dollar stimulus and all of the pork passed thus far has been going into the pockets of special interests and not to projects except for that which has been used for unemployment.

The US needs a high speed rail system for example. The US needs more nuclear plants. We need to build out the internet. We need a smart grid. But because every little bill is being micro managed to ensure everyone’s hand get greased, especially those that believe they got Obama elected which they most certainly did not. Hint: It was the economy.

In fact the TARP that was used already did more for the economy than anything passed thus far by congress. Instead we give away billions to Nebraska and Louisiana and the unions on health care. This is why the business as usual congress needs to change, instead of now acting like new found populists essentially criticizing themselves.

We need a new way forward and we have too many dinosaurs in congress doing the business as usual. Congress is holding up the projects until they can get their people in there to screw them up.

No need for out of control spending OR out of control taxes.

[mrspiffy]

03:44 PM on 01/27/2010

Little Professor Sunshine...
http://yieldpig.blogspot.com/

[bayviking]

02:56 PM on 01/27/2010

Danny DeVIto's look alike know's what he's talking about.