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Roubini Warns Global Economic Crisis Will Worsen In 2009

December 31st, 2008

Nouriel Roubini is known as “Dr. Doom” for his earlier predictions that a housing bubble in the United States would lead to disaster for the international financial and banking system. Roubini, Professor of Economics at the Stern School of Business, New York University and also Chairman of RGE Monitor, an economic and financial consultancy, was proven correct. Now he is considered the wisest sage on the future course of the Global Economic Crisis. His latest prediction will not lighten the hearts of investors.

In a recent article, Roubini stated that “the worst is still ahead of us. In the next few months, the macroeconomic news and earnings/profits reports from around the world will be much worse than expected, putting further downward pressure on prices of risky assets, because equity analysts are still deluding themselves that the economic contraction will be mild and short.”

Nouriel Roubini adds that the credit crisis will grow worse, pointing to a grim year ahead for global financial markets. He suggests in his article that “2009 will be a painful year of global recession and further financial stresses, losses, and bankruptcies. Only aggressive, coordinated, and effective policy actions by advanced and emerging-market countries can ensure that the global economy recovers in 2010, rather than entering a more protracted period of economic stagnation.”

While Roubini has thus far avoided using the term “Great Depression” to describe what he thinks may happen, it is clear that the world’s top economist on forecasting the Global Economic Crisis sees no grounds for optimism. His sobering assessment of what lies ahead for 2009 makes clear that a catastrophic year ahead awaits the global economy. He warns that the severe deflation now threatening will nullify monetary policy as a means of addressing the economic crisis, further enhancing the grave danger of a liquidity trap.

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