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Mark Lennihan / AP Photo No one on Wall Street has been as prescient about the economic crisis as Nouriel Roubini. He talks with Tunku Varadarajan about his new book, Crisis Economics, why Goldman Sachs is wrong, and the future of England.
Getting time with Nouriel Roubini this week is like scoring an audience with the pope. Even his friends—and I am one—have to jump through hoops set up by zealous publicists at Penguin, which has just published his new book, Crisis Economics. “Meet me at the bar at Jean Georges at 2, so we can talk after lunch,” Roubini tells me by email Wednesday. So I show up at the bar of this deeply swank Manhattan restaurant a half-hour early, his book in hand, to immerse myself (as I wait) in a bracing combination of economics and caffeine. I should have known better. No sooner do I place the book on the counter than the elegant dowager to my left gushes, “I saw him on TV! Roubini, I love him.” The man to my right, giving off a strong whiff of banker, asks me whether I believe everything Roubini says. And so conversations ensue. (Can I dip into the book in peace? No chance.)
“Goldman Sachs is a hedge fund. It’s bigger than any hedge fund. It’s more leveraged, to the power of three or five, than any hedge fund.”
Roubini, a professor at the Stern Business School at NYU, has earned fierce renown for making—as his own book puts it—“the most famous prediction in advance of the [economic] crisis.” In the fall of 2006, he told a skeptical audience at the IMF that the American economy—then thought to be in heavenly condition—was hurtling toward a hellish housing bust, a shuddering oil shock, and the deepest recession since the Great Depression. He was bull’s-eye right, earning him the name of “Dr. Doom,” and he swiftly became, without exaggeration, the best-known economist in a world terrified of the economy.
Crisis Economics: A Crash Course in the Future of Finance By Nouriel Roubini 368 pages. The Penguin Press. $27.95. Do the American people still have faith in capitalism? I ask Roubini, as we exit the restaurant into a limo that will take us to his next meeting, near Wall Street. “I think so,” he says. “They do. But I think that one of the lessons of the financial crisis is that the public also grudgingly realizes that prudential government intervention, at least in the regulation and supervision of the financial system, might be necessary. There isn’t a wholesale rejection of capitalism, but I think there was a greater faith 10 years ago in an unfettered, laissez-faire market economy.”
Roubini’s speech is rapid and oracular, and I notice that the limo driver—a burly Dominican—is cocking his ear in our direction. “What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics. People say it’s all because of government intervention, but look at what happened in previous centuries, well before we had central banks, and before we had government fiscal policy.”
Is ours a greedier age than any before us? I enquire. “I wouldn’t say that,” Roubini says, and I detect, in the rear-view mirror, a crinkle in the limo-driver’s eye. “Look, in some sense, there’s nothing wrong with greed. If we didn’t have greed, market economies wouldn’t be as innovative as they are. But in my view, greed has to be contained by the fear of losses, so there has to be a system where, if you take too much risk, you go into bankruptcy. You don’t systematically bail out people who take excessive risks.”
View as Single Page 12 Back to Top May 14, 2010 | 12:38am Facebook | Twitter | Digg | Share | Emails | print var OutbrainPermaLink=document.location.href.replace(document.location.search, '').replace(/\/\d+\/$/,'/').replace(document.location.host, 'thedailybeast.com'); var OB_Template = "The Daily Beast"; var OB_demoMode = false; var OBITm = "1255455386150"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } Crisis Economics, Nouriel Roubini, Books, Dr Doom, Nouriel Roubini Book, Nouriel Roubini Interview, Obama Finance, Cameron, Financial Reform, Nonfiction, Deficits, Tunku Varadarajan, Book Beast, British Government, Finance, Obama, Business, Goldman Sachs, Wall Street (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: Genni2002
A). Bully for Roubini that he was right in 2006 or was it a lucky guess? What other predictions did he make that did not come true. And B). He sounds pathetically soft on GS who basically is robbing the American people blind to line pockets defending them and saying what they did and do is a problem of perception. What a load of horse crap! They are gamblers period. Just because something is with-in the letter of the law that they help get written, doesn't mean it isn't evil. Oh, and stop blaming the law and regulations for your nefarious behavior GS!
Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 2:46 am, May 14, 2010 case1234Tunku Varadarajan should stick to financial reporting, where he has insight. Politics and security... not so much.
Flag It | Permalink | Reply 7:55 am, May 14, 2010 LostPatriotGen, From what I've seen the people who work for companies like GS are given huge $500,000 bonuses because they really would be difficult to replace. These are people who are highly intelligent sociopaths who are artists at dancing on the line between illegal and legal sometimes entering the illegal and not getting caught. Maybe half or more of the total population are sociopth, however to find highly intelligent sociopths trained to steal is very difficult making the bonus scenario necessary.
Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 5:54 am, May 14, 2010 wtcarlisYou are dead right, and the people in Congress who "oversee" the mess are sociopaths of lesser intelligence. That's what incompetent sociopaths do; they get into politics. So we can be fairly sure that the new regulatory board will be staffed with lesser sociopaths.
Flag It | Permalink | Reply 10:24 am, May 14, 2010 PezmediaWhat a soft and lame interview and bunch of weasily answers. He said nothing , i mean nothing that has not been in the mainstream bullsh*t media for months , even years. Is is incredible to have a man with apperently soooo much insite into a topic so vast and compelling and yet he said nothing. GS is bad because they leveraged way too much and play both sides , Obama is doing what he could , people are greedy , new government in Britain will blame the previous ... Come on. This is all insanely obvious. Does he have a gag order or something, is this man a puppet now. -Uemplyment 9.9 % really 17 % -Alt A and option Arms Mortgage reset incresaing forclosure rates -Mortgage defaults rising. - people walking away from home -Half of US mortages underwater -Debt Rising loads -High Frequency Trading involved in 70 % of trades today -Last Thursday "fat figure " Bulls*t - How insane was that - NEWSFLASH - IT WAS NOT A CLERICAL ERROR. -Market run by computers not humans -Wall streets disconnect from main street and it getting worse not better. -Wall street running and owning Washington lock stock and barrel -Audit the Fed -Freddie and Fanni lost 13 bilion and 8 billion in the last quarter and need MORE bail out money This all came to my mind in 2 minutes about how insane the situation is and this former Dr Doom economic genuis comes out with obvious, spin doctored ,soft, crap ... The questiosn is - who ownes this guy now...
Flag It | Permalink | Reply 8:05 am, May 14, 2010 hahailRegulate Wall Street? What about regulating our Federal Government? Those folks are a million miles away from reality! Try reading the crap posted on the federaltimes.com. I am outraged that the "health care reform" is NOT going to affect THEIR good benefits. Yet, it's going to affect mine!
Flag It | Permalink | Reply 8:27 am, May 14, 2010 darsmindThere are a lot of people that involuntarily shoot blood from their eyes when they hear things like regulate Wall Street. That's like saying, "we need new immigration reform." How 'bout we enforce the regulations we have and stop looking at porn and start doing our jobs. He wasn't the only person saying the financial house of cards was about to come crumbling down but very few people were listening. Now we talk about regulation with no mention of Feddie and Fannie being reformed- so we just keep handing them out more money. I do agree with Roubini regarding being "to big to fail", let them fail. Let them lose their jobs for stupid mistakes and they want make those mistakes again. Let GM break the union contracts, let California go bankrupt, let people lose their homes- then, just maybe people want be so stupid to make the same mistakes twice.
Flag It | Permalink | Reply 9:52 am, May 14, 2010 wtcarlisA regulatory board is one solution, but conscious investors would be better, and are imperative is capitalism is to survive. My first rule is to never invest in any corporation whose CEO is also Chairman of the Board. Regardless of how great they may be doing now, there is no way you can trust their financial statements because the CEO picks the auditors. There are a lot of other red flags that have been ignored by investors in the past, and will continue to be until it is too late. Therefore, we will eventually have a European-model economy, at which point the only ethical thing to do would be to give America back to the Indians and go back to the old world we seem to love enough to emulate.
Flag It | Permalink | Reply 10:09 am, May 14, 2010 johnstaffordIf Dr. Roubini is, indeed, "the best known economist in a world terrified of the economy," then why isn't he on the TV talk/news shows more often? (N.B.--PBS doesn't count). =I bet Alan Greenspan, one of the architects and chief cheerleaders for the "free-market, self-regulating" economy that got us in this mess, has guested on the Sunday morning news shows in the past year, for example, more often than Roubini by "the power of" 3! =Roubini is just the latest example of how people who warned about predicted disasters involving our country (e.g., McGovern on Vietnam, Nader on car safety, Gore on global warming) get "disappeared" or reduced to objects of ridicule; while those who led us into disaster, like Ronald Reagan ("Government isn't the solution; government is the problem") has become a revered figure for Republicans and many Democrats.
Flag It | Permalink | Reply 11:50 am, May 14, 2010 dominusThe Federal Reserve should be abolished. We need campaign refinance reform, term limits, the Glass Steagall act reinstituted, and, last but not least, this representational voting has got to go. The American people should be allowed to vote on all the big issues including health care and financial reform.
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