Times like these tend to make demi-celebrities of a handful of economists–the ones with the biggest, um, crystal balls–and none more so than Nouriel Roubini. Roubini, who came to be known as Dr. Doom after his prediction of a subprime-led global credit crisis came true last year, has released his US and global economic forecasts for 2009.
Here’s a CNBC interview with Roubini from last Thursday. In it, he says the risk of a long-term stagnation/depression of the sort Japan experienced in the 1990s and beyond has been reduced since last fall to roughly one in three.
Which does not mean the news is good. Key quote: “We almost had a systemic financial meltdown in the fall, but now the G7 have committed not to let any systemically important financial institutions fail. That’s going to reduce the systemic risk, but my latest estimate–a year ago, I said the credit losses would be $1 trillion to $2 trillion. I’m coming out this week with new estimates of over $3 trillion, and half of it comes from US banks and broker dealers. Since their capital was less than a trillion and a half, that means the system is insolvent. Even if you use all of the rest of the TARP money, $350 billion, to recapitalize banks, we’re going to need another trillion dollars of capital in the financial system to bring back the capital to a level that they can start lending again.”
And here is the (much more detailed) US 2009 forecast that Roubini’s company, RGE Monitor, released yesterday. More about this later.