OUTRA RECESSÃO À VISTA, SEGUNDO ROUBINI

Mission impossible: stop another recession

By Nouriel Roubini

The first half of 2011 showed a slowdown of growth – if not outright contraction – in most advanced economies. Optimists said this was a temporary soft patch. This delusion has been dashed. Even before last week’s panic, the US and other advanced economies were odds-on for a second severe recession.

America’s recent data have been lousy: there has been little job creation, weak growth and flat consumption and manufacturing production. Housing remains depressed. Consumer, business and investor confidence has been falling, and will now fall further.

Across the Atlantic the eurozone periphery is now contracting, or barely growing at best. The risk that Italy or Spain – and perhaps both – will lose access to debt markets is now very high. Unlike Greece, Portugal and Ireland these two countries are too big to be bailed out.

Meanwhile, the UK has seen flat growth as austerity bites, and structurally stagnating Japan will recover for a few quarters – after double-dipping after the earthquake – only to stagnate again as the stimulus fizzles out. Even worse, leading indicators of global manufacturing are slowing sharply – both in the emerging economies like China, India and Brazil, and export-oriented or resource-rich countries such as Germany and Australia.

Until last year policymakers could always produce a new rabbit from their hat to trigger asset reflation and economic recovery. Zero policy rates, QE1, QE2, credit easing, fiscal stimulus, ring-fencing, liquidity provision to the tune of trillions of dollars and bailing out banks and financial institutions – all have been tried. But now we have run out of rabbits to reveal.

The misguided decision by Standard & Poor’s to downgrade the US at a time of such severe market turmoil and economic weakness only increases the chances of a double dip and even larger fiscal deficits. Paradoxically, however, US Treasuries will probably remain the world’s least ugly safe asset: risk aversion, equity declines and a looming slump could even see treasury yields fall rather than rise.

Fiscal policy is now contractionary in both the eurozone and the UK. Even in the US the issue is only the amount of drag, as state and local authorities, and now the federal government, cut spending, reduce transfer payments and (soon enough) raise taxes. Another round of bank bail-outs is politically unacceptable. But even if it were not, most countries, especially in Europe, are so distressed that their sovereign risk is actually leading to banking risk – as banks are loaded up with distressed government debt.

Hopes for quantitative easing will be constrained by inflation that is well above target levels across the west. The Federal Reserve will probably start a third round of QE, but it will be too little too late. Last year’s $600bn QE2 (along with $1,000bn of tax cuts and transfers) produced a growth bump of barely 3 per cent, for one quarter. QE3 will be much smaller, and will do much less.

Nor will exports help. All advanced nations need a weaker currency, but they cannot all have it together – if one is weaker another has to be stronger. This is a zero sum game which risks only the resumption of currency wars. Early skirmishes are beginning as Japan and Switzerland try to weaken their exchange rates. Others will soon follow.

So can we avoid another severe recession? It might simply be mission impossible. The best bet is for those countries that have not lost market access – the US, UK, Japan, and Germany – to introduce new short-term fiscal stimulus while committing to medium-term fiscal austerity. The US downgrade will hasten demands for fiscal reduction, but America in particular should commit to look for significant cuts in the medium term, not an immediate fiscal drag that will worsen growth and deficits.

Most western central banks should also introduce further QE, even though its effect will be limited. The European Central Bank should not just stop rate hiking: it should cut rates to zero and make big purchases of government bonds to prevent Italy or Spain losing market access – the outcome of which would be a truly major crisis, requiring doubling (or tripling) of bail-out resources, or debt workouts and a eurozone break-up.

Finally, since this is a crisis of solvency as well as liquidity, orderly debt restructuring must begin. This means across the board reduction on the mortgage debt for the roughly half of America’s households that are underwater, and bail-ins for creditors of banks in distress. Greek-style coercive maturity extensions, at risk free rates, must also come for Portugal and Ireland, with Italy and Spain to follow if they lose market access. Another recession may not be preventable. But policy can stop a second depression. That is reason enough for swift and targeted action.

The writer is chairman of Roubini Global Economics, professor at the Stern School, NYU and co-author of Crisis Economics

NOURIEL ROUBINI

Intellectual pin-up Nouriel Roubini has breakfast with the FT

By Gillian Tett

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Granted, until the financial crisis started three years ago, he had spent most of his career analysing economics and writing books with titles such as Political Cycles and the Macroeconomy (1997) or New International Financial Architecture (co-editor, 2005). He was also responsible for delivering a series of speeches on the fragility of the banking world so dour that they earned him the monicker “Doctor Doom”.
But in 2007, all this changed unexpectedly. The financial crisis exploded and, almost overnight it seemed, the world realised that Roubini was one of the few economists who had actually predicted the looming banking collapse. Today policymakers around the world hang on his words, journalists flock to his speeches to hear his latest predictions and clients pay big money to receive analysis from his consultancy company, Roubini Global Economics.

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I have been an economist for 20 years!”
Indignantly, he runs through the details of his career. It is unusual. Born in Istanbul in 1959 to Iranian Jewish parents, he spent his early years in Iran, before moving to Italy, where he attended school and university. He subsequently moved to the US and Harvard, where he did a PhD in economics, then taught at Yale and in New York. Roubini, who speaks Italian, Hebrew and Farsi, says he finally felt he had arrived in the US “about 15 years ago, when I started dreaming in English”. During this period he also did stints at the International Monetary Fund, Federal Reserve, World Bank, the US White House Council of Economic Advisers and the Treasury department, before setting up his own consultancy firm.
Hardly the cv of a nobody, it’s true. But Roubini was still far from being a household name when, in the autumn of 2006, with the world economy and credit markets booming, he gave a big speech to the IMF warning 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”, along with “homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unravelling worldwide and the global financial system shuddering to a halt”. It was a bold call; so much so that many policymakers and economists thought Roubini was slightly mad.
Indeed, when Roubini attended the World Economic Forum meeting in Davos in January 2007 to make similar prophesies, his warnings were widely dismissed. It was at this rarefied Swiss mountain resort that I first encountered him and I remember it very well. In the preceding months I had also started to write about the dangers of complex finance (albeit far less eloquently and dramatically than Roubini) and those pieces sparked criticism from some of the luminaries assembled at Davos, who accused me of being “alarmist”. Though we had never met before – and have barely talked since – at one sun-dappled lunch in a stuffy Swiss hotel Roubini forcefully defended my articles. I tell him I was grateful; vocal Cassandras were very thin on the ground back then.
“I remember that,” Roubini laughs. He then recalls, with irritation, a column written by Michael Lewis, author of the acclaimed Wall Street study Liar’s Poker (1989) as well as the recently published study The Big Short (2009), during that Davos meeting, which labelled Cassandras such as Roubini as “wimps” and “ninnies”. “It is amazing how some people have changed their views,” he says, adding acerbically that “there is a lot of Monday morning quarterbacking” now.
Why did the banking world spin out of control in 2007? Roubini has co-authored with Stephen Mihm, a professor of economic history, a book about the banking collapse, Crisis Economics, which seeks to answer this question and suggest what can be done to put it right. At first glance it covers similar ground to all the other “crunch lit” books now being churned out by economists. What sets this one apart, however, is that unlike almost every other economist – exceptions include William White and Claudio Borio of the Bank for International Settlements – Roubini can claim to have got things right before disaster struck. So what made him so sure he was right, I ask, as our understated breakfast arrives on the low table next to the leather sofa. The only splash of colour is a vast strawberry adorning my power shake.
“Having spent 10 years studying emerging markets, I know that you have patterns repeated over and over again,” he explains. “A bubble is like a fire which needs oxygen to continue ... when you see there is no oxygen, things change.” More specifically, by the summer of 2006 Roubini could see that the housing market had peaked. That left him convinced that the system was about to unravel, because there was so much mortgage debt.
He has continued to issue warnings since the crash. In early 2009, he argued that the banking crisis might not be finished. He also suggested that there was a 20 per cent chance of a double-dip recession, because American growth would be so weak. In fact, the US economy has rebounded faster than he expected and bank share prices have risen too. All of which leaves some rivals gloating that Roubini was simply lucky with his 2006 call. He retorts, though, that it is still too early to conclude that the global economy is really on a recovery track. And at least one recent call has been correct: for the past year he has repeatedly warned about dangers stalking sovereign debt. In particular, he thinks that the dramas in Greece reflect a bigger problem facing the western world, since governments appear to lack the stomach to tackle spiralling government debt.
“What really worries me about the US right now is that there is this [political] gridlock,” he says, arguing that this prevents the government from taking the necessary tough decisions. “The UK has the same problem. There is no real willingness to have spending cuts or tax increases.” As a result, “there will be temptation to keep monetising the fiscal deficit”, which will ultimately produce inflation.
To combat those risks, Roubini wants policymakers to co-operate across party lines and to break out of their old ideological boxes of “left” and “right”. “I grew up in Italy in the 1960s and 1970s and it was a period of a lot of social turmoil, when even young teenagers were engaged in politics. I was slightly more left of centre then,” he says, stirring sugar into his latte, making elegant swirls of brown and white. These days he is “centrist” on economic issues, since he believes that governments need to spend money in a crisis to support the system, in line with Keynesian economic ideals – but he believes that when a crisis is over, they should revert to free-market approaches, reflecting the so-called “Austrian school” of economics. “There is this big debate between the Keynesian school and the Austrian school. But I am pragmatic and eclectic. It is all about timing.”
So where would he suggest people put their money now? What does he do? He looks coy. “I have never in my life bought an individual stock, bond or currency. I have my own 401k [pension and savings pot] in a passive fund – 100 per cent equity investment, half US, half non-US. All the extra income I have received in the past few years has gone into cash. At some point I will move that into riskier assets, but not now.” This caution seems typical of Doctor Doom, I suggest. He disagrees. “Dr Doom as a nickname was cute and I did like it for a while but what I keep saying now is that I am Dr Realist.”
In other words, Roubini now wants to be known as a sage who can proffer constructive advice, instead of predicting disaster. Indeed, on the day we meet he has written a column for the FT urging Europe to let Greece restructure its debt. And he has just returned from Washington, where he met a group of senior western finance ministers and central bankers. “What is important to me is that when I write something, people listen to me. I provide my wisdom to people, whether they agree or not.”
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TÍTULOS DO DIA

Joseph Stiglitz põe a hipótese de Portugal ou Espanha falirem "É Portugal, e não a Grécia, que coloca o maior problema existencial à Zona Euro" Depois da Grécia... a Hungria? Reino Unido pode seguir-se à Grécia Stiglitz diz que euro pode desaparecer «Inimigos do euro estão a revelar-se»‎ Roubini diz que «Portugal pode sair do euro»‎ Portugal pode sair do euro? Os problemas da economia portuguesa em poucas palavras Custo da dívida pública portuguesa ultrapassa a Irlanda pela primeira vez desde o início da crise

ROUBINI EM LISBOA

EUA não podem crescer a depender de bolhas
Roubini adverte para o início de uma bolha nos mercados
Os fundamentais não justificam, só por si, a forte escalada nos mercados de activos, afirmou hoje em Lisboa o economista Nouriel Roubini, célebre por ter previsto a mais recente crise financeira. Roubini falou dos sinais de bolha nos mercados de activos e do risco de forte correcção.
"Petróleo pode voltar aos 100 dólares e isso será muito penalizador para a economia"
"Recuperação vai ser lenta e anémica nas economias desenvolvidas"
Portugal está a perder competitividade e precisa de acelerar reformas

DABLIÚ

Nouriel Roubini foi capaz de quantificar, provavelmente com alguma aproximação, e digo provavelmente porque os valores reais nunca serão conhecidos com precisão, a dimensão da vaga de empréstimos subprime, que esteve na origem da crise incubada nos EUA e exportada para todo o mundo. Aqui, no Aliás, Nouriel Roubini começou a ser referido há mais de dois anos.

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Actualmente, é frequentemente, notícia em toda a parte. Hoje mesmo, o Jornal de Negócios Online dá conta que "o cobre já ganha 96% este ano, e que as matérias-primas (em geral) disparam em todos os mercados, reforçando o movimento de subida, com alguns produtos a atingirem máximos de vários meses, e que as declarações do economista Nouriel Roubini, célebre por ter previsto a actual crise e que aponta agora para a continuação do "rally" nas "commodities" em 2010, estão a ajudar à tendência".

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Roubini, na sequência desta evolução, prevê que a recuperação poderá ocorrer mais cedo do que o previsto até agora, provavelmente ainda durante o último trimestre deste ano, mas a recuperação não será sustentada porque a travagem das expectativas inflacionistas* provocarão nova inflexão negativa antes de 2012. Haverá, portanto, segundo Roubini, sol de pouca duração. A evolução da crise terá um perfil em W, um prognóstico que está longe de ser novo e exclusivo de Roubini. Mas como Roubini aparece a caucioná-lo, e o mercado parece tê-lo tomado por profeta, as declarações de Roubini estarão a exarcerbar a tendência que também ele constata.

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Antes da crise, Roubini pregou no deserto. Agora é Maia global.

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* Inflação já estará de volta?

O QUE DIZ ROUBINI

LAST week Ben Bernanke appeared before Congress, setting off a discussion over whether the president should reappoint him as chairman of the Federal Reserve when his term ends next January. Mr. Bernanke deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0.
Mr. Bernanke understands that in the Great Depression, the collapse of the money supply and the lack of monetary stimulus during contractions worsened the country’s economic free fall. This lesson has paid off. Mr. Bernanke’s decision to keep interest rates low and encourage lending has, for now, averted the L-shaped near depression that seemed highly likely after the financial collapse last fall.
To be sure, an endorsement of Mr. Bernanke’s reappointment comes with many caveats. Mr. Bernanke, a Fed governor in the early part of this decade, supported flawed policies when Alan Greenspan pushed the federal funds rate (the policy rate set by the Fed as its main tool of monetary policy) too low for too long and failed to monitor mortgage lending properly, thus creating the housing and credit and mortgage bubbles.
He and the Fed made three major mistakes when the subprime mortgage crisis began. First, he kept arguing that the housing recession would bottom out soon (it has not bottomed out even three years later). Second, he argued that the subprime problem was a contained problem when in reality it was a symptom of the biggest leverage and credit bubble in American history. Third, he argued that the collapse in the housing market would not lead to a recession, even though about one-third of jobs created in the latest economic recovery were directly or indirectly related to housing. Mr. Bernanke’s analysis was mistaken in several other important ways. He argued that monetary policy should not be used to control asset bubbles. He attributed the large United States current account deficits to a savings glut in China and emerging markets, understating the role that excessive fiscal deficits and debt accumulation by American households and the financial system played.
Still, when a liquidity and credit crunch emerged in the summer of 2007, Mr. Bernanke engineered a U-turn in Fed policy that prevented the crisis from turning into a near depression. He did this largely with actions and programs that were not in the traditional toolbox of monetary policy. The federal funds rate was effectively pushed down to zero to reduce borrowing costs and prevent the collapse of consumer demand and capital spending by business. New programs encouraged skittish institutions to resume lending. For the first time since the Great Depression, the Fed’s role as lender of last resort was extended to investment banks.
Mr. Bernanke also introduced a wide range of other programs, like those to maintain the functioning of the commercial paper market (which makes short-term loans to companies so they can cover operating expenses like payrolls). The Fed was involved directly in the rescue of financial institutions like Bear Stearns and American International Group. It lent money to foreign central banks to ease a global shortage of dollars. The Fed even committed to purchasing up to $1.7 trillion of Treasury bonds, mortgage-backed securities and agency debt to reduce market rates. These are all radical actions that had almost never been undertaken before.
Some of these moves have raised important questions: Did the Fed help bail out institutions that should have been allowed to fail? Did it cause moral hazard as reckless lenders and investors were effectively bailed out? How and when will the Fed mop up the excess liquidity that its actions have created? Will these actions eventually cause inflation and a sharp fall of the value of the dollar? Has the Fed lost its independence as it has accommodated the fiscal needs of the government by bailing out banks and printing money to cover large fiscal deficits?
Still, the basic point remains: The Fed’s creative and aggressive actions have significantly reduced the risks of a near depression. For this reason alone Mr. Bernanke deserves to be reappointed so that he can manage the Fed’s exit from its most radical economic intervention since its creation in 1913.

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Nouriel Roubini is a professor of economics at the New York University Stern School of Business and the chairman of an economics consulting firm.

APOSTAS

Paul Krugman duvida das previsões de Ben Bernanke
Paul Krugman, prémio Nobel da Economia, duvida das previsões de Ben Bernanke que indicam que os Estados Unidos vão evitar uma depressão económica e sair da crise antes do final do ano. Krugman recordou que o Japão "perdeu uma década" para superar a crise.

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Trichet afirmou, na semana passada, que a recuperação estava para breve. Agora é Bernanke a tocar a mesma nota. Que informações ou inspirações possuem os banqueiros centrais que Krugman ou Roubini, além de muitos outros, não dominam?

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Ouvindo os noticiários (esta manhã, o noticiário da Antena 1 dava conta de manifestações em França de contornos pré-revolucionários) somos levados a acreditar que os pessimistas, como sempre acontece quando a vaga do descontentamento se agiganta, acabarão por acertar.

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A personalidade contida de Bernanke é, nas actuais circunstâncias, menos motivadora da inversão da tendência que seria a de Greenspan, apesar dos erros que cometeu e reconheceu ter cometido. Porque há, inquestionavelmente, um efeito psicológico em todas as crises, bem mais difícil de inverter do que todas os outras causas materiais, e que tem uma resultante dominada pela força da maioria das opiniões expressas.

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Krugman e Roubini, independentemente das suas competências enquanto macro-economistas, estão, desde há muito tempo, disponíveis para expressar as suas opiniões nos media, incluindo a blogosfera. Não seria preferível que fossem mais comedidos nas suas previsões, sabendo eles que são, por natureza, falíveis? Faz sentido que nos descrevam um futuro negro se não nos garantem os meios para o tornar menos escuro?

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Cada pregoeiro de desgraças deveria ser assaltado por um sentimento de pudor que o compelisse a acompanhar o diagnóstico da terapêutica.

MAIS OU MENOS CRISE

Presidente do BCE admite proximidade do regresso ao crescimento económico
O presidente do Banco Central Europeu (BCE) disse hoje que os investidores estão a subestimar a possibilidade de um regresso ao crescimento e que o mundo pode estar a aproximar-se de um ponto de viragem.

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Queda adicional de 12%
Roubini prevê S&P500 nos 600 pontos este ano
O professor de Economia da Universidade de Nova Iorque, Nouriel Roubini, afirmou que o índice Standard & Poor’s 500 deverá cair para os 600 pontos este ano, ou até mesmo para valores inferiores, uma vez que a crise económica se está a intensificar.

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Há muito tempo que acompanho as posições de Nouriel Roubini acerca do evoluir da crise; provavelmente, serei mesmo o blogger que há mais tempo o citou na blogosfera portuguesa. Roubini ganhou a admiração de meio mundo ao prever e quantificar a dimensão da crise. A sua perspectiva continua do lado pessimista.

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Contrariamente a Roubini, Trichet aparece agora com uma visão optimista para a Europa, prevendo a inversão do ciclo para breve. Se considerarmos que a generalidade dos analistas prevê que recuperação aconteça nos EUA antes de chegar à Europa, a diferença Trichet-Roubuni é ainda mais notável.

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Tem tudo isto alguma influência no desenrolar crise? Tem de ter. A psicologia de crise que se instalou alimenta, evidentemente, a crise. As palavras de Trichet, que não podem ser de todo infundadas, ou até pouco sérias, terão por enquanto uma influência menor sobre o comportamento dos agentes económicos em todo o mundo do que as de Roubini e de todos os que estão do lado dele, e que são a esmagadora maioria.

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Seria bom que Trichet fosse mais explícito e convincente nos seus argumentos. A inversão da onda de pessimismo é essencial à inversão do ciclo depressivo económico.

Pela minha parte sou pelo Trichet, desta vez. O que é que se pode perder com isso? Argumentos, não tenho. Espero que Trichet os tire da manga.

CONTOS AMERICANOS : PESSIMISMO PERSISTE

de: http://www.rgemonitor.com/blog/roubini  

AEI Event on the Deflating Mortgage and Housing Bubble, Part II --> Nouriel Roubini Oct 12, 2007 I presented yesterday at a AEI event on Deflating Mortgage and Housing Bubble, Part II. The first event was last March when the subprime carnage was emerging; this one was a follow-up debate on what is happening now and next to housing, mortgages, subprime and the financial system. The presentations at this event - by Desmond Lachman, Thomas Zimmerman, John Makin, Chris Whalen and myself - are also available at the event site. All the presenters were very pessimistic about the worsening housing recession, about the severity of the credit crunch in mortgage markets and about the risks of an economy wide recession.

A RIQUEZA DOS POBRES

Nouriel Roubini é, nos dias que correm, um dos economistas mais lidos e ouvidos nos EUA. Roubini, de origem italiana*, mantem um blog, RGE, do qual respiguei o seu comentário, colocado no blog anteontem, 21/3**, sobre um artigo publicado na Business Week acerca das consequências perversas do crédito compulsivo. Portugal não é os EUA mas há problemas comuns, geralmente do lado negativo.

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In recent years, a range of businesses have made financing more readily available to even the riskiest of borrowers. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge...

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As an online addition to this excellent cover story Business Week asked me and another blogger, Tyler Cowen from George Mason University to debate online the following question:
Stop Fleecing Poor Americans. The U.S. government should place greater restrictions on car sellers, pay-day lenders, and tax preparers who offer the working poor cash or credit with high fees and interest rates. Pro or con?

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Correcções - *Nouriel Roubini nasceu em Istambul filho de pais iranianos judeus (2010/05/08)

** - Obviamente, 21/5