Dr. Doom: ‘We are headed towards a recession’

Jeff Poor Media Reporter
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He is best known for predicting the speculative housing bubble all the way back in 2005 that would eventually devastate the U.S. economy. And in 2011 Nouriel Roubini, aka “Dr. Doom,” remains pessimistic about the U.S. and most advanced economies.

In an appearance on CNBC’s “Closing Bell” Thursday, host Maria Bartiromo asked Roubini what people should expect with Federal Reserve Chairman Ben Bernanke’s speech tomorrow, and if it might be a signal of a third round of quantitative easing, or QE3.

“Well, I would expect QE3 is going to be implemented sometime later this year,” Roubini said. “Tomorrow, he might not announce it. He has Republicans in the House bashing him and saying you are going to cause, you know, high inflation or debase the currency.”

However, Roubini said QE3 is a signal the economy is headed toward another recession because the policy responses are becoming desperate.

“[B]ut the reality is that we are headed towards a recession and we’re running out of policy bullets,” he said. “One of the few policy bullets left is more monetary policy or quantitative easing.”

“The data on the real economy … initial claims, announced layoffs, consumer confidence, weekly retail sales numbers … GDP numbers were low and they are going to be revised even lower tomorrow morning for QE2, home sales collapsing, starts and permits still down,” he explained. “Every economic indicator suggests that we’re already beyond the stall speed. We’re at the beginning of an economic contraction at this point.”

Roubini explained the recession would be one felt globally, except for economies with ties to China and a few others.

“[I]f you look at most advanced economies with a few exceptions maybe Canada, Australia, Norway, that are related to resources in China, most of the advanced economies are beginning to contract again,” he said.

The New York University professor had doubts that President Barack Obama’s much-ballyhooed speech set for September on the economy would have an impact because of the legislative impediments.

“[H]e is going to make the speech. The reality, however, is that the Republicans in Congress are not going to vote for it under the excuse of fiscal discipline [and it being] very difficult … the worse the economy gets, the more likely Obama is going to lose the election and Republicans are going to be winning. So the approach is the worse the better. So he can make any speech he wants, I don’t see any chances that this Congress will pass whatever he proposes.”