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Posts Tagged ‘black swan’

Nouriel Roubini Issues New Warning On Global Economy

June 23rd, 2011 Comments off

In a piece for Al Jazeera entitled “black swan events and the global economy,” NYU economics professor Nouriel Roubini, the “doctor of doom,” has presented a new dark perspective on the current state of global economics. Roubini integrates a number of negative economic metrics and phenomena, including “black swan” events such as the Japanese earthquake and more mundane though far from rosy economic data that challenges the views of economists who are eternally optimistic. While the optimists believe the current negative economic factors are merely hiccups, and equity growth can resume in full force, Roubini warns that the dangers confronting the global economy are chronic, and may lead to a double-dip recession.

On the current Greek debt crisis, Roubini writes, “Global risk-aversion has also increased, as the option of further ‘extend and pretend’ or ‘delay and pray’ on Greece is becoming less desirable, and the specter of a disorderly workout is becoming more likely.”

One of the points Nouriel Roubini makes in his article is that  new financial and economic disasters on the scale of 2008 and would leave policymakers empty-handed, as the massive growth in public debt since 2008 leaves them without ammunition in the event of a new series of catastrophes. As Roubini puts it:

“This lack of policy bullets is reflected in most advanced economies’ embrace of some form of austerity, in order to avoid a fiscal train wreck down the line. Public debt is already high, and many sovereigns are near distress, so governments’ ability to backstop their banks via more bailouts, guarantees, and ring-fencing of questionable assets is severely constrained. Another round of so-called ‘quantitative easing’ by monetary authorities may not occur as inflation is rising – albeit slowly – in most advanced economies.”

In essence, Roubini offers a portrayal of the current state of the global economy that is laden with doom and gloom.

 

Global Economic Crisis Much Worse Now Than Two Years Ago, Warns Nassim Taleb

June 11th, 2010 Comments off

In an interview with CNBC, the bestselling author of  “The Black Swan,” Nassim Taleb, described the current economic environment as being significantly deteriorated from 2008, when Lehman Brothers went bankrupt. In his gloomy assessment of the global economic crisis, Taleb said, “We had less debt cumulatively (two years ago), and more people employed. Today, we have more risk in the system, and a smaller tax base.”

According to Nassim Taleb, the core economic and financial problem afflicting major economies is a saturation of debt, both public and private. The current Eurozone and UK debt crisis is a manifestation of the age of austerity that lies before us. The United States and UK share the debt crisis afflicting Eurozone economies, however policymakers are still addicted to deficits even in the current critical economic environment. Taleb warned that a debt crisis could not be countered by taking on even more debt, a policy response he compared with giving more alcoholic beverage to an alcoholic.

Nassim Taleb also pointed out that toxic assets on bank balance sheets were as severe a problem now as two years ago. While acknowledging that governments have used taxpayer money to take some toxic assets off bank balance sheets, he pointed out that further degradation of remaining bank assets due to deteriorating economic metrics meant that banks were as fragile today as they were in 2008.