TNR Profiles Dr. Doom

The New Republic has a profile on Nouriel Roubini, "the economist known to the general public as Dr. Doom, Prophet of the Financial Apocalypse," by Julia Ioffe.

Though he hasn't attacked the Obama administration's policies with Paul Krugman's fury, and though he is no longer the most bearish of the bears, his short-term outlook is still quite bleak: a 36-month downturn, double-digit unemployment, and sluggish, recessionary growth well into 2010. ...

Roubini understood better than anyone just how weak the fundamentals of our economy were. The day after the now-famous 2006 IMF talk, he went on 'Kudlow & Company,' on CNBC. Roubini was, as always, the foil to Kudlow's chipperness. 'All my friends are in a great mood, Nouriel. They're in a terrific mood. They love America,' Kudlow sang. Roubini countered starkly: 'Well, they're all rich,' he said. 'The average American actually is in debt'--a sign to Roubini that housing would only be the catalyst of something larger.

Roubini Says Stress Test Data Overstate Macro Econ Health

Update II: As those elitist liberals hash out how to avoid a depression, the GOP and its leading journals, Human Events for example, are busily at work solving the real problem: Investigate NOW The Compelling Evidence That Barack Obama Was Born In Africa! Tea anyone, perhaps some Kool-Aid? [Photo by Russell Wallace taken at the state capital TEA Party where some 3,000 white people gathered to protest anything not Republican.]

Update: Paul Krugman in his column in the Times sums up a note of optimism, after expressing similar concerns of Nouriel Roubini's in the piece below: Krugman believes that Obama administration economists understand the imperative of: "Persistence." Without writing it, Krugman is suggesting that the GOP TEA set should not deter the course for economic recovery. In other words, ignore the fools and press on.

It's not Nouriel Roubini's (Dr. Doom) job to make us feel good. Good thing. [By the way, you can get a free subscription and access to Nouriel Roubini's Global EconoMonitor and you should consider it.] Roubini calls the stress tests "fudge tests".

On Nouriel Roubini's Global EconoMonitor, Nouriel explains that actual macro data for 2009 are already worse than the more adverse scenario in the stress tests. The actual macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in FDIC baseline scenario for 2009 aand even worse than those for the more adverse stressed scenario for 2009.

Check out: Stress Testing the Stress Test Scenarios: Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded ...

Conclusion: Actual macro data for 2009 are already worse than the more adverse scenario in the stress tests. These are not stress tests but rather fudge tests

This financial crisis was one due to opacity and lack of transparency in financial markets and due to regulators that were asleep at the wheel. But now the administration officials and regulators have decided to add to the fog of opacity by adding to the lack of transparency in financial markets: regulatory forbearance that allows banks such as Well Fargo to declare charge-off rates and to set aside reserves for loan losses that make no sense relative to the state of the economy and relative to their loan book; partial suspension of mark-to-market accounting that allows – starting with Wells Fargo – to hide losses and reduce the amount of write-downs on securities; likely reinstatement of some variant of the uptick rule that will restrict shorting of stock and will artificially boost equity prices (a form of legalized manipulation of the stock market by regulators that are trying to prevent short-sellers to do their job, i.e. make stock prices reflect fundamentals and prevent bubbles in stock prices); and now stress tests that fail the basic test of a reality check by making assumptions – that even in the worst case scenario that is designed from start to be too mild to be a sensible realistic stress test scenario – that are obsolete based on actual data for the economy as of Q1 of 2009. Call it a generalized 'fudge test' rather than a true 'stress test'.

Roubini: No Quick, V-Shaped Recovery

But no inflation either, says Roubini.

From TechTickers:

As we noted earlier, Nouriel Roubini of RGE Monitor actually has a surprisingly non-apocalyptic forecast for the economy: The first quarter of this year will mark the worst rate of decline, and the outlook will gradually improve from there.

We'll still be in a recession through 2009, says Roubini (in contrast to most economists, who think the economy will be growing nicely by Q4). But then, finally, the economy will begin to recover.

But what will this recovery look like? Will it be the V-shaped rocket launch that some bulls are looking for?

No.

Politically, a growing chorus of political analysts see a populist reckoning at home, one that Republicans will absurdly try to appropriate. In Europe, Obama and Brown Urge United Action on Economy while protesters there hang bankers and financial speculators of exotic products in effigy.

Matt Taibbi on the Global Economic Crisis

Trying to comprehend the Global Economic Crisis, a diligent lay reader can construct some broad narrative of the scale and motives of the financial sectors' machinations and the political and regulatory duplicity by reading Paul Craig Roberts, Nouriel Roubini's Global EconoMonitor, Paul Krugman, CounterPunch, among several other sources late at night.

But the undertaking is still like trying to understand the mathematics of SuperString Theory. We are not equipped.

Matt Taibbi's 8,700-word piece in Rolling Stone puts together the most coherent piece that I have read yet.

Check Taibbi's piece out, and bear it in mind as you read of the next attempt by the Obama administration (and the GOP pushback and its alleged concern for the everyday American) to try to contain this seeming black hole that appears to have come from nowhere and is somehow aligned with strange forces in our society, equipped with properties that transform our government into some vaguely malevolent entity. Sounds like science fiction.

Most Americans harbor vague notions that our country is run by a few powerful interests looking out for themselves. Most Americans appear to have been correct.

An excerpt from Taibbi:

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: 'The marketplace is a pretty crummy place to be right now,' he said. 'When the world catches pneumonia, we get it too.' In a pathetic attempt at name-dropping, he even whined that AIG was being 'consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down.'

What's Up

No one knows if the Dow's bottom is going to be at 6,500 as Nouriel Roubini, Dr. Doom, predicted a few months back. We're all hoping now that he was optimistic.

Two things are certain: The stimulus bill signed by Obama is woefully inadequate and Obama should make clear the comprehensive recovery program that he intends sooner rather than later.

Ask someone on the street what Obama is doing to address the economic crisis left by Bush and he couldn't tell you, but they would like to be inspired very soon.

Nothing catches the imaginations of unemployed American people like a massive jobs program, though the wrong people (Americans not contributing money to the GOP) would benefit, according to GOP nostrums.

By the way, what Obama has done so far is "exactly wrong," says Newt Gingrich. So, Obama is in the ballpark if Newt hates it, but Obama's message of recovery is not getting through yet.

The American people suspect vaguely that something the last eight years went very wrong; they need a clearer conception that Obama is employing the kitchen sink strategy right now to fix it.

Failing that, the connection that Obama enjoys now with the public as someone whom we are behind will disappear or get tentative and conditional very soon.

Always hated the idea of political leadership, seems antithetical in a democracy, but establishing the politcal psychology of a leader at the controls (though it be illusionary) of a complex machine that is the US-world economy is critical at this moment.

A line of credit for banks to lend? People hate the idea, now matter how necessary it is.

How about a direct line of credit to the American people that they can use to eat, pay rent, fend off foreclosure and raise families? Republicans will hate it, we love it.

via mal contends

Economists who got it right

Worth regularly reading the economists who got it right:

Paul Krugman's Blog (NYT)

Roubini's Global EconoMonitor

Roubini: Dismal Outlook for the US and Global Economy

Warnings that President-elect Obama err on the side of doing too much as Americans watch their retirement savings dissipate are words from the wise.

From Nouriel Roubini's The Dismal Outlook for the US and Global Economy and the Financial Markets:

- The U.S. will experience its most severe recession since WWII, much worse and longer and deeper than even the 1974-75 and 1980-82 recessions

- Obama will inherit and economic and financial mess worse than anything the U.S. has faced in decades

- The world economy will experience a severe recession ...

Risk of Severe Global Depression

One does not need to be a Cassandra to suggest that the "world is at severe risk of a global systemic financial meltdown and a severe global depression," but RGE Monitor's site warning of just that is worth giving a read in light of recent financial market developments.

RGE Monitor "delivers ahead-of-the-curve global economic insights that financial professionals need to know. (Their) analysts define the key geostrategic debates and continuously distill the best thinking ... ."

At Counterpunch, Paul Craig Roberts offers an outline of a possible solution to the crisis suggesting: Refinancing the troubled mortgages, carefully re-regulated financial markets, addressing US budget and trade deficits, halting the Bush wars, cutting the extravagant US military budget, among other fiscal and regulatory reversals.