The UK has taken the necessary radical action to tackle the credit crisis, can cope perfectly well with higher government debt, and should stage a strong economic rebound thanks to the competitiveness of its manufacturing sector.
If you are about to tune out from what sounds like just another speech by Gordon Brown, then you may be startled to learn that these decidedly un-doomy predictions are in fact from Nouriel Roubini, the dour-faced economist universally known as Dr Doom for forecasting the credit crisis, the recession and the collapse of the finance industry as we knew it.
Mr Roubini, a professor at New York University, is currently, rightly famous – because he was consistently, famously right.
"If you want to be very negative you would say that there were only three things that led the UK to high growth in the last decade or so – finance, housing and government – and all three are in trouble now, so how will the UK grow? But what I would say on the other side is that the UK is still the fifth-largest manufacturing power in the world. A weak pound will lead to a recovery in exports. The labour market in the private sector is more flexible in the UK. Just look, for example, how many Japanese auto plants are based in the UK. It has a sound basis for economic recovery later next year."
The tone of the professor's remarks would be music to the Prime Minister's ears, except that a careful read of the lyrics suggests caution. An economic recovery "later next year" was not on the songsheet of Alistair Darling at his Budget last month. His economic forecasts predict the stirrings of growth later in 2009, and the Government's tax and borrowing needs are based on those more optimistic predictions.
Nonetheless, the outspoken Mr Roubini is notably withholding his venom. "We are more bearish than the consensus, on the US as well as the UK," he says. "Maybe we will be proven right, maybe wrong. Most important is whether a country is able to pursue the policies that will lead to a recovery in 2010 and 2011. The UK has taken more radical action to take over financial institutions that are insolvent. It is expensive and it is difficult in the short term, but it is the basis for credit and for an economic recovery over time."
The world divides into those whose governments can afford to backstop the financial system – such as the US – and those that cannot – among which Mr Roubini mentioned Ireland. The UK can. The British government's debt is "challenging ... but basically financeable", he says.
He cautions nonetheless that the Government must tread carefully. "Markets get nervous, spreads widen, downgrades happen, and even a country that does not have debt that is too high might find itself with issues refinancing its debt." But again, the UK, he says, "is not Iceland".
We're conducting the interview over the telephone, but you can hear him almost smile. "I'm not Dr Doom, you know. I prefer to be called Dr Realist."
The unique accent – mixed and matched from his four languages – is familiar now from his television appearances and his public speaking, for which he is in great demand. What is less familiar is how reasonable he sounds. Perhaps it is because he is less doomy now, since the actions of policymakers have taken a global depression and a financial panic off the table.
"I was one of those predicting a 24-month recession in the US; the optimists said this would be an eight-month recession, but they got it wrong. I will be the first to call a bottom when I see one. The consensus is that the US recession will be over in June. I see it ending in December, so it is only six months difference. I am not a perma-bear. A nickname is just a nickname. My views are not particularly extreme."
His language, however, remains a million miles from the dry economese of other academics, and his lifestyle as a single man about town in New York also sets him apart. His tendency to lash out at critics has put him in the middle of some entertaining spats. Last year, he penned a late-night rant in response to an article on the New York gossip website Gawker which had called him a "playboy". More recently, he has been to-ing and fro-ing with Jim Cramer, the loud-mouthed share tipster on CNBC television, who called him "intoxicated with his prescience and vision".
"I don't want to get into fights with people," Mr Roubini says. "There are many serious analysts out there and I am having an intelligent discussion with them and I am having a dialogue with senior people in the policymaking world. Other people who are out there in showbusiness, I couldn't care less about them, so 99 per cent of the time I just ignore it."
How will Mr Roubini's reputation fare if the world economy pulls itself quickly out of the mire and the financial system heals? We shall see. In a newspaper column penned before the release of the US government's "stress tests" of the nation's banks, he predicted that the private sector would not fund any bank that was told it had too little capital, and it would have to fall back on government money, but immediately Morgan Stanley and Wells Fargo raised $12bn between them. Nonetheless, he is sticking by his broad stance that the stress tests underestimated the severity of the losses still to come, as unemployment soars and borrowers default, and that some big banks still face "creeping" nationalisation.
"Some of the biggest holes are at Bank of America and Citigroup, which face significant economic losses. We have already seen, in the last few days, equity prices correcting after a bubbly period, and I do think you will see serious constraints on the weakest banks' ability to raise as much capital as they are required to raise."
A new run on these banks is off the table, he says, now the US government is backstopping the system, so a re-run of last September's meltdown is unlikely, but that does not mean the crisis is fixed. "The glass is between two-thirds and three-quarters full. But the rest of it is empty – and the part that is empty is pretty important."
So not Dr Doom any more. More like Mr Gloom.
Nouriel Roubini: Art lover who saw the writing on the wall
Nouriel Roubini has been professor of economics and international business at New York University's Stern Business School since 1995, and was also an adviser to the White House and the US Treasury between 1998 and 2001.
Manhattan seems the perfect home for a global wanderer who was born in Turkey to Iranian parents, and who lived in Tehran and Tel Aviv and Italy before his schooldays were done. In New York he patronises the arts, hosting "high brow and low brow" salons, film screenings and parties, and collecting sculpture – and pictures from his 50th birthday party in March finally revealed the "vagina-studded walls" that have been a staple of gossip columns. It is a "tasteful art piece", he says.
In common with perhaps a majority of the elite club of experts who saw the credit crisis coming, a lot of Mr Roubini's earlier work at NYU focused on emerging market debt crises. After publishing a book of lessons from those crises earlier this decade, he turned his attention to the US and, he says, "it looked like the biggest emerging market of all, like a timebomb".Reuse content