Nouriel Roubini, the man whose warnings over the credit crunch were ignored, tells Jon Snow that banks have learned little from the economic crisis and that Europe will probably face a ‘double dip’ recession.
Jon Snow talked with the remarkable professor Nouriel Roubini, the Iranian-American economist who was almost alone in forecasting the crash in all its horror and dubbed ‘Doctor Doom’.
He says we are in a very bad way again – that when to raise interest rates is a very fine judgement but that ideally it will have to be in the next six months and then they may well go on rising.
He warns that there is a “30 or 40 per cent chance” of Europe going into a double dip recession, and that in the next three to five years the Euro zone will be smaller than it currently is and that money alone cannot solve all the problems so, “lots of sacrifices” will be required along the way .
In the interview, which he also covers in his new book Crisis Economics, he warns that the banks have learned little from the economic crisis.
“It’s back to business as usual, lots of leverage, lots of risky investments and return to high profits based on subsidies by the government, bonuses, salaries you name it.
“So we’re planting the seeds of the next financial asset bubble.”
Finally, when asked if we’re out of the recession here in the UK the answer is to the point:
“No. We’re at the new stage of the crisis. Initially the crisis was excessive debt and leverage of the private sector, houses and financial institutions.
“Now we’ve socialised many of the private losses, we’ve put them in the balance sheet of the governments.
“So, this crisis has morphed from private sector debt to public sector debt, that’s why we’re still in the middle of it.”
You can read the interview below or watch the full interview here.
INTERVIEW: NOURIEL ROUBINI
Britain has posted the worst inflation figures for 19 years – are economies being too tolerant of inflation because in effect it gets their debts down?
Certainly, when you’re in a situation which many countries including the UK are running very large budget deficits – and last year almost all of the deficit in this country was financed by the Bank of England by printing money equal to the deficit, so there’s been a monetisation of this deficit – the value of the currency, the pound, has fallen and through this channel there’s been an imported inflation.
Therefore there’s a risk of a rise in inflation in this country and one way of financing fiscal deficit is essentially printing money as opposed to issuing debt.
BY: MAX KEISER / REAL STORY ON HEDGE FUND EURO MURDER WEAPON