Dr. Doom Predicts Economic Standstill in 2013

Economist Nouriel Roubini, renowned for his doom-and-gloom predictions as well as his accuracy, says that economic recovery in America is a "pie in the sky" notion. What do you think?

Sure, the restaurants are full and contractor's trucks are again whizzing through the neighborhoods as Lamorindans catch up on remodeling plans this summer but some experts say these signs should not be taken as an indicator that the American economy is on the mend — at least, if economist Nouriel Roubini, aka Dr. Doom, is to be believed.

And there is one good reason to believe Roubini: he accurately predicted the 2008 economic crisis — all the way back in 2006. At the time, the analysis was generally laughed off, The New York Times described, and Roubini became known as what economists call a “permabear" — a "permanent" believer in a "bear" stock market, defined by investor fear and pessimism. 

Now, the NYU professor is bursting what he sees as an over-inflated bubble of optimism once again and claiming that the American economic recovery "will remain, at best, below-trend for many years to come."

In an op-ed published on the Project Syndicate website, titled "American Pie in the Sky," "Dr. Doom" says that economic growth will continue to slow in the second half of 2012, and that 2013 threatens to bring the economy to an almost grinding halt. 

A few factors will contribute to continued slow-down in growth and spending, says Roubini, including:

  • Automatic tax increases and spending cuts set for the end of 2012
  • Uncertainty about who will be president in 2013
  • Uncertainty about tax rates and spending levels
  • The threat of another government shutdown over the debt ceiling
  • The risk of another credit rating downgrade resulting from political gridlock

"In such conditions," predicts Roubini, "most firms and consumers will be cautious about spending – an option value of waiting – thus further weakening the economy."

Roubini also cites problems caused by the inconsistency between private sector growth and wages, as well as "external forces" such as the deepening eurozone crisis, the slowdown of emerging economies and the risk of higher oil prices.

"Dr. Doom," of course, should not be confused with Victor von Doom, an archenemy in the Marvel comic book universe.

What are your predictions for the economy in 2013? Do you agree with Dr. Doom? How is the local economy in Lamorinda faring, in your opinion? Share your thoughts in the comments.

Louise Benvenue July 26, 2012 at 04:13 PM
I know a lot of people who worked closely with financial markets and "predicted" the 2008 meltdown. This guy is not Nostradamos.
TMoraga July 26, 2012 at 07:04 PM
He's nothing special. The media reporting and sensationalizing economic news easily has one of the largest impacts on our economy possibly more so than the actual real numbers. The General public is so easily swayed by media all we need is for all the major news outlets to start spinning incomplete stories about failure - or what appears to be epic game ending mistakes AKA JPMorgan's recent blunder which is a painful mistake but not a game ender for a roughly 60 billion dollar company. If we were to have a year of zero Media coverage of financial news other than the Wall ST journal we would probably have one of the most epic financial years in the history of our country. LOL
Larry Tessler July 26, 2012 at 07:09 PM
What is the support for this prediction? My thought: I think we will languish due to a sea change that moves Federal Government control from Congress to the Administration with a large diminution in the value of our checks and balances system. Two multi-thousand page bills (Affordable Care and Dodd-Frank Banking) has shifted law making from Congress to bureaucrats who have written or who are currently writing thousands of expensive regulations with no Congressional oversight. Although the Presidential executive order has had substantial impact recent such executive orders are having wider and considerably more negative impact. See the most recent order on work-to-welfare.
natalie johns July 26, 2012 at 07:16 PM
Yes. I don't want to know. I'd rather live in a news blackout. That way I can just say no one ever told me about that and blame the media for failing to reach me. As a matter of fact, can't we just blame the media for EVERYTHING???
TMoraga July 26, 2012 at 08:00 PM
Natalie - there is a difference between ignorance is bliss - and actually spending the time to understand what is actually happening. All the Major Media outlets today are in a race to beat the interweb and zero actual Journalism is taking place regarding creating a balanced and informative news presentation when it comes to things as complex as our economy and financial system.
Sue Haas July 26, 2012 at 08:08 PM
So you prefer the single source information stream of the WSJ, which is fine, if you happen to believe they're the end all be all of reporting on this subject. I read them, and several other publications, some of them international in focus. Saying you should shut out all other publications strikes me as extreme at least and not very wise.
TMoraga July 26, 2012 at 08:59 PM
Sue you and Natalie are suggesting that not I. My point was simply that beyond the written Journalism effort every day Media regarding complex things like the financial system or economy is simply junk news used to stir up the masses who all think that the Banks asked for TARP funds when it was actually the US GOV which said EVERYONE GETS IT NO IF and or BUTTS About it- and Oh by the way regardless if you need it - pay us interest while you pay it back. All you need to do is read and listen to the general public about hot media driven topics and the truth is so far from perception it makes the United States look like its full of short bus people. We don't even know what was actually done LOL
TMoraga July 26, 2012 at 09:39 PM
It does not take a rocket scientist to sort out that when your spending more than you have - on a large scale - and continue to do so and have major financial failures taking place with Cities and local governments that the system is broken. Not to mention that the political climate we have today has created one of the most ANTI TAX public view points we have had in the US. The things that have major impact on economic activity is policy making or in some cases a lack there of of policy making resulting in a shift in what type of business succeeds and what business fails. The US GOV just recently approved tariffs on imported cheap labor solar components. That does not fix the Solar production companies in the US who have already failed because they can't pay their labor 50cents an hour and work them 6 days a week 14hrs a day.
MG July 27, 2012 at 03:26 AM
What one should take from the article is the fact we deserve the folks we've elected. We can all agree on the fact that our leaders don't enjoy "any heavy lifting." They pander to our worst vices, greed, laziness and envy, and we avoid the important issue and vote for the guy that sounds nice and turn away when we catch them lying. But then again, we don't really want someone to tell us the truth. Politicians are deathly afraid to tell you we can't afford things. It's of course true, but they realize we are simply too trigger happy to fire the messenger. Wake up each morning and tell yourself "We deserve these guys." You'll live a more stress free life.
TMoraga July 27, 2012 at 03:51 AM
MG the down fall of our country will be the day that the majority of the voting public contribute nothing to the society it demands hand outs from. Yes the politicians in office mirror the majority vote.
Jose July 27, 2012 at 05:45 AM
Seriously? The Mayan calendar has a better record of predicting drought, depression, and mass cool aid suicides. Why was this posted as a topic ? The man has no credentials.
Louise Benvenue July 27, 2012 at 03:57 PM
MG, I think most people like the candidates they elected. It's the "other guys' candidates" we have a problem with. The fact is, the re-election rate of incumbents is extremely high. I think this contradicts your point above. Also, most of us in this area are well educated, and don't fall victim to pandering. I also don't think we are a vice-ridden crowd, so I am not sure what "worst vices" are being pandered to. You call us greedy, lazy and envious. Geeze, who are you hanging out with??
MG July 27, 2012 at 10:38 PM
LB, Not sure what high rate of incumbents has to do with my point other than reinforce the "lazyness" factor. My comments were more universal of the electorate more in line with TMoraga's observation, not Lamorinda per se. You should take a serious look at what the majority looks like these days, its not Lamorinda. It looks more in line with folks who (1) are angry they didn't read their mortgage documents before they bought a house, (2) believe a company's obligation is to its workers and not its owners, (3) they are entitled to get free or low cost food, shelter, healthcare, retirement, fuel, etc., and (4) they bear no responsibility for repaying $100K they borrowed to pursue a degree in 15th century french literature.
Louise Benvenue July 27, 2012 at 10:50 PM
Have you conducted extensive studies to categorize the majority? How did you get your data to state items 1-4 above?
Louise Benvenue July 27, 2012 at 11:54 PM
PS As I stated earlier, I think the high rate of incumbents getting re-elected means that people ARE happy with their politicians. I don't vote for an incumbent because I am lazy, I vote for one because I believe their performance was in line with what I expected of them.
TMoraga July 28, 2012 at 05:41 AM
Have any of you been in the polling booths in SF? SF is considered one of the smartest cities regarding voters and if you have ever been in the polling station for any period of time you really need to wonder how much most of the voting population understands given an hour in the polling station in SF and you can easily be telling your self that our country is doomed.
Louise Benvenue July 29, 2012 at 01:00 AM
Well, I think you are in good company regarding this article by Dr. Gloom. It seems you carry the most negative of negative opinions about the general population. One hour in the polling booth in one area of one city makes you an expert? In order to make accurate assessments you need data and facts. It seems you and MG are lacking in this department. So, yes, we are all doomed. Enjoy your last moments. I plan to.
TMoraga July 29, 2012 at 06:18 AM
Lamorinda lacks reality when it comes to even a generic slice of voter reality for most of the US. Louise. If you have not been involved in such things out side of la lamorinda your view of the world is twisted in a big way.
Louise Benvenue July 30, 2012 at 04:18 PM
Hi TMoraga, I grew up in New York, went to a rural college, have lived in California and Missouri. I have been to all 50 states and about 35 countries on 4 continents, including China in 1986 and the (former) Soviet Union. I doubt my view of the world is "twisted" or even limited; but you can continue to draw conclusions based on whatever you like.
TMoraga July 30, 2012 at 04:46 PM
Your posts would suggest that you have the classic LaMorinda small town view of things. Traveling does not make you a world expert. You can travel the world and never actually experience the places you visit. Heck my AirForce family members have lived outside the US longer than they have lived in the US and have some of the most twisted perceptions of the world given they never leave the fake bubble called the Air Force BASE. Not to mention that working a voting location in various places is not related in any way or form to traveling.
Chuck Clark December 07, 2012 at 12:16 AM
I think any analyst that is perpetually bearish or perpetually bullish is worthless. Perpetually bearish guys, like Roubini, make the news all the time because bad news sells. Plus, eventually, they're right. Nobody ever remembers how long they were wrong for before finally having their moment in the sun...or how much profit you missed out on if you were listening to them the whole time.


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