Broken clock?
We were catching up on Davos at the WSJ and this came up — an economist who apparently predicted 2007 pretty correctly and was in a decided minority of opinion at the time:
Last year, Nouriel Roubini was the lone pessimist on Davos’ five-person opening economics panel. His colleagues predicted the world economy would continue to grow strongly without overheating, a rosy scenario economists dubbed “Goldilocks.” Mr. Roubini, chairman of Roubini Global Economics and a New York University economics professor, demurred. “Goldilocks is threatened by three ugly bears,” he said, predicting a subprime meltdown, an end to cheap credit and rising oil prices would bring U.S. consumer spending to a halt. At the time, Mr. Roubini’s “ugly bears” provoked more laughter than concern.
But Goldilocks has already met two of those bears and signs are mounting that the third — in the form of a sharp falloff in U.S. consumer spending — could show up soon. “Sometimes people say about me that even a broken clock can be right twice a day,” says Mr. Roubini, who contends his habitually gloomy outlook has been, over the years, more nuanced than he’s given credit for.
Now, though, he’s unabashedly glum. “2008 will be an ugly year,” he says. The question of whether the U.S. will fall into recession is stale: “Now the debate is, how bad will it be? I think it will be extremely severe.” Financial-market conditions will get much worse: “When you add all the losses, not just subprime but also soon enough on auto loans, credit cards, student loans, leveraged loans and corporate bonds, we’re looking at $1 trillion of losses in the financial system.”
We were unfamiliar with Mr. Roubini prior to today; he does have some impressive credentials. However, as he even admits, he has evidenced an “habitually gloomy outlook.” He has been saying rather similar things for years. Here are some examples from 2005, for example, in the media and elsewhere.
Whether the “broken clock” is correct this time remains to be seen. However, Mr. Roubini and his colleagues are clearly thoughtful analysts, and we must add that some of their views of the fundamental causes of today’s structural imbalances parallel our own views. It would be a particularly opportune time for Mr. Roubini to become the broken clock he describes himself as, and hence to be wrong in his assessment of the unpleasantness of the rebalancing of risk that is currently underway.
January 23rd, 2008 at 8:16 am
Nouriel Roubini was predicting that the US would be in recession in the first quarter of 2007. His was not accurate in his prediction. The title of your post is spot on : even a broken clock is right twice a day.