Nouriel Roubini: Global Economy Not Back to 2008



























3:16 AM PST
January 22, 2016






Nouriel Roubini, NYU professor and chairman at Roubini Global Economics, explains why the global economy isn’t facing the same conditions as 2008, and discusses expectations for the Federal Reserve's rate hike path and how QE is working in Europe. 








He speaks from the World Economic Forum in Davos, Switzerland on "Bloomberg Surveillance." (Source: Bloomberg)





Listen to entire interview:






Henry Blodget: 


So, it's not 2008 all over again?





Nouriel Roubini: 

No, I don't expect it's 2008 again. I don't expect a global recession or financial crisis.

The current turmoil is driven by a bunch of factors, primarily concern that China might have a hard landing and collapse of its stock market and currency.

My view of China is that it's going to have a bumpy landing, not a hard landing. Growth this year of 6% going to 5%. Those who say it's 4% going to zero, I think they're getting it wrong. They don't realize that the service sector is rising and growing much faster than the manufacturing sector.

The US is slowing down, especially manufacturing. And the fall of oil prices is a negative, at least in the short run, because the US is a major producer of oil and energy. The fall in oil prices is negative for the markets because the market has a certain weight coming from oil and energy companies. But more importantly, it's not just a supply shock that is driving oil prices but concerns about global demand. China. Emerging markets. And concerns about weakening demand are a negative sign for the global economy.

The Middle East is a mess. The proxy wars between Saudi Arabia and Iran are getting worse. And even in Europe, there's terrorism and the migration crisis, the risk of Grexit, the risk of Brexit, austerity fatigue in the periphery, bailout fatigue in the core — there are plenty of issues that can go wrong in Europe. So, suddenly, the market is becoming nervous and there's a correction.

Whether the correction becomes a true bear market depends on whether these shocks are more persistent or less persistent, first. And second on the policy response.

At this point, the PBOC (central bank of China) will have to ease more. The Chinese will have to do a round of fiscal stimulus. The Fed will have to signal more clearly they're going to wait longer before they hike rates again. And the European Central Bank and the Bank of Japan will have to ease more.

If all central banks try to do more, you can maybe stop or reverse this particular correction. If you don't have a strong policy response, this could become an outright economic slowdown.





http://www.businessinsider.com/noureil-roubini-on-economy-and-markets-2016-1