Speaking in Hong Kong, Nouriel Roubini, the Harvard- schooled New York University professor who in 2006 foresaw the financial crisis, warned of trouble for the second half of the year.
Bloomberg: “The real economy is gradually recovering but since March, asset prices have gone through the roof,” Roubini said. “If I’m correct, by the second half of the year, there’s going to be a slowdown of growth in U.S., Europe and Japan. That could be the beginning of a market correction because the macroeconomic news is going to surprise on the downside.” [emphasis added]
As he’s been saying for sometime, he expects policy remedies — following the issuance of a wave of public debt — to have only limited effect on the effectiveness of monetary stimulus.
“In the U.S., where the Federal Reserve has pledged to keep interest rates near zero for an “extended period,” (rising interest rates as the economy stabilizes would only erode the growth effects of fiscal stimulus packages) the risk of a policy mistake is significant especially in an election year, Roubini said.
“The path of exit is very narrow and the risk of a mistake is significant,” he said.
Roubini also said he sees Europe and Japan as “having less room to implement counter- cyclical policies compared to the U.S., making it less likely for those markets to lead the world in the global economic recovery”.
Touching on the subject of Sovereign Risks, Roubini said he expects sovereign risks in Europe to rise as a result of persistent budget deficits and expects the appreciation of the yen and euro against the greenback as “making things worse”.
On China Roubini said he sees the tightening of China’s “super loose” monetary policy as a necessary step for sustainable growth, adding that consumption rates there are still very low.