Dr Doom sees the gloom lifting

The New York professor who predicted the credit crunch is in a less pessimistic mood these days. Recovery is not too far away, he tells Stephen Foley

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".

News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
New Articles
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
News
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
i100
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
ebooksAn unforgettable anthology of contemporary reportage
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
booksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering