Dr. Doom Says Good Times To Resume

I have been a fan of editor James Fallows and economist Nouriel Roubini. I’ve taken notice of Fallows since reading his book in 1989, More Like Us: Making America Great Again, which gave tremendous insights right before Japan’s lost decade.

I’ve also been a fan of Roubini, the New York University economist known for his predictions of doom against the prevaling winds. He accurately forecast the bursting of the housing bubble and the resulting economic contraction, which is what makes his current outlook surprising: Roubini believes that the Obama administration’s policy makers—and especially the much-maligned Tim Geithner—have gotten a lot right. Pitfalls may still abound, but he is now projecting an end to the recession, and he sees growth ahead. Here’s what Fallows reports Roubini said to business leaders just recently in my decade old stomping ground of Hong Kong: 

But at some point—Roubini’s guess is 2011—the recession will end. Banks will want to lend the money; people and businesses will want to borrow and spend it. Then it will be time for what Roubini calls “the exit strategy, of mopping up that liquidity”—pulling some of the money back out of circulation, so it doesn’t just bid up house prices and stock values in a new bubble. And that will be “very, very tricky indeed.”

… In Roubini’s view, there is no choice but to intervene. “We have to do what’s necessary to avoid a real depression,” he said. But he added that it is not too soon to lay plans for avoiding the consequences of too much money flowing rather than too little. – The Atlantic

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Side-note: There is another economist, who runs a business in Asia rather than teaches economics. He is also called “Dr. Doom.”  I have followed Dr. Marc Faber's considerable writings for decades. As the economy was melting down in 2008, Dr. Faber, an advocate of how economies are internationally connected, whimsicially concluded his monthly bulletin with the following:

The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer/Software it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part. – The Daily Telegraph