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Nouriel Roubini

Dr. Doom - whose parents named him Nouriel Roubini - has not rebranded himself as a Pollyanna, in spite of his recent statements that he does not expect a "double-dip" recession, which many observers currently fear.

Professor Roubini, an economist at New York University, became famous as perhaps the most prescient predictor of the financial crisis of 2008. Since then, he has not been in the habit of issuing soothing commentaries.

On Sunday, in Aix en Provence, at an annual conference of Le Cercle des économistes, a French group, Prof. Roubini said that a second contraction was not likely, either in the United States or in the world economy as a whole.

This sounded reassuring, in the wake of a column by the Nobel-prize winning economist Paul Krugman in the New York Times, in which he likened the present to the 1930s and said, "The odds of a prolonged slump are rising by the day." That column has stimulated a vast amount of worried commentary in the past few weeks.

But Prof. Roubini is no mere contrarian, swimming against the tide that is now being expressed by Prof. Krugman. Instead, he is predicting a slowing of growth in the United States from 3 per cent to 1.5 per cent - and indeed in China (from a higher level, to be sure) - and either zero growth or recession in the euro zone, while Japan is "falling off a cliff," as he put it in an interview with CNBC in June.

His message about the United States is one of weak recovery, in which much of the growth that has occurred since the low point has been inventory replacement. After taking that into account, "final demand," or more concretely, final sales remain modest. Credit is tightening, house prices are falling, mortgages losses are rising, and total employment is down.

While corporate profits in the U.S. are up, largely thanks to slashed costs, unused capacity remains high and is not about to be refilled soon, Prof. Roubini points out. The decline of 2008-2009 was what is known as a "balance-sheet" recession (like the crash of 1929), and U.S. companies are indeed repairing their balance sheets.

Prof. Krugman's column was a call to arms against what he thinks is premature deficit reduction in the U.S. On this point, Prof. Roubini supports fiscal austerity in countries that are in danger of their governments' defaulting, but he thinks that the U.S. is not yet ready with enough non-governmental, "private demand," so that the time is not yet ripe for what he calls fiscal consolidation.

Nouriel Roubini is not being a pessimist or an optimist. He is giving quite a measured account of the state of affairs in the United States, and much of the rest of the world. On the evidence of his latest remarks, he is neither Pollyanna nor Dr. Doom.

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