American economist Nouriel Roubini was dubbed Dr. Doom because of his gloomy predictions for the world economy. He correctly predicted the 2008 collapse of the U.S. housing market and the subsequent global recession.The Globe and Mail
For Nouriel Roubini, Toronto was a 36-hour touchdown amid flights to India, Hong Kong and Mexico. Then, after a weekend pit stop in Manhattan, he would be off again: two weeks in Europe, appearing in Davos, Switzerland, for the World Economic Forum, then Milan, London, Berlin, Moscow. Just an ordinary month in the nomadic life of one of the world's most famous economists, a.k.a. Dr. Doom, the man who forecast the implosion of the U.S. housing bubble two years before it happened.
As chairman of Roubini Global Economics, the powerhouse consulting firm (he is also a professor at New York University), Mr. Roubini, 52, spends 60 to 70 per cent of his life on the road, and sleeps an average of four to five hours a night when travelling.
In Toronto this week to speak at the Grano Speaker Series, he sat down with The Globe and Mail's Michael Posner.
I suspect the 2006 call on the U.S. housing crisis was your best. What was your worst?
In 2009, in the depth of the recession, I was right in saying the recovery in advanced economies would be anemic and subpar, but I was surprised that quantitative easing by the Fed led to such a massive rally in U.S. equity prices. I thought the stock market would stay at the same low or lower levels of March, 2009. I missed that run, not seeing how easy money and liquidity could lead to massive equity rally, in spite of the fact that economic fundamentals were still fragile.
You're something of an anomaly. Economists typically reside in a world of tables, charts and statistics. You're considered a rock star and a playboy.
People are not just geeks, nerds, dweebs or wonks and nothing else. I love and collect contemporary art and go to all the art fairs. I love Damien Hirst and Matthew Barney. I grew up in Italy and had a humanistic education in philosophy and literature – things I love and appreciate. People are richer and more complex than just their day-to-day professional pursuits might suggest. For me, geopolitical issues are becoming more important, because how can you understand economy if you don't understand geopolitics? People think economists just deal with spreadsheets and charts. That's a narrow-minded caricature.
How much of your own money is in the stock market?
It changes over time. I'm not an active investor. In 2007, when I became worried about the global financial meltdown, I essentially moved everything into cash and other liquid instruments. I believe investors should invest for the long run, so I don't buy and sell. I usually maintain the classic index of global equities, diversified U.S. and global and emerging markets, and when the risk is larger, I diminish the amount in global equities and put more into liquid assets – but very irregularly.
What's your assessment of how well Canada is doing in the current global environment?
It's a mixed picture. The overall fundamentals are better than many advanced economies. The fiscal situation, the balance sheet, is better. The banks have been better regulated. But now, with weakness in U.S. and Europe, growth will be below trend. Household debt is rising. There is some frothiness in the housing market. I don't see a bust as in the U.S., but I would not rule out a 10-per-cent correction.
At last count, you had more than 128,000 Twitter followers. What do you make of that?
Lady Gaga has millions. Justin Bieber too. But among economists only [New York Times columnist]Paul Krugman has more. I follow a few hundred. Among the social media – I've tried them all – Facebook is a bit of a game, but Twitter is a productivity tool. I use it regularly and I'm addicted to it.
In Europe, austerity is now the order of the day. Is that the right approach? Or would it be wiser to pursue growth and then, later, begin budget cuts?
Yes, while fiscal austerity could be necessary over time, in the short run it makes the recession worse. As it is, they are raising taxes, cutting transfer payments, and cutting government spending. One is reducing aggregate demand and the others reduce disposable income.
Without economic growth, the debt is not sustainable. It becomes a vicious circle. Markets force you into austerity, which makes the recession worse, which deepens the fiscal deficit, requiring more austerity.
So Europe today needs policies and strategies to restore growth. Pure austerity alone will be severely recessionary and eventually will produce a depression.
Are you an optimist on the future of the Arab Spring?
I have mixed feelings. In the long run, it will be a good thing. Those regimes had to change. But I have no illusions that it will be a smooth transition to democracy, to economic success. The pie is very small and everybody wants a bigger share of it. It may be a mess.
Eastern Europe had the support of Europe, the U.S., the IMF, the ECB – 10 years of subsidization and only now are some countries starting to do well. Many are still fragile. And that's with a history of rule of law.
In Egypt, Tunisia and Libya, we are very far from that. It will take a long time to stabilize.
Why have you never married?
I spend about three-quarters of my time travelling. Of course, everything is endogenous. You make choices, trade-offs. You can have greater success professionally, but your personal life takes a back seat. You cannot have it all.
You've cited the possibility of a perfect storm – a double-dip recession in the U.S., a hard landing in China and the fracturing, if not outright collapse, of the euro zone. What are the odds of that?
Significant – close to 50 per cent, unless the world changes its economic policies. But it's a 2013 or 14 or 15 story, not 2012. Because all the players for now are kicking the can down the road.
Given that risk, the uncertainly about North Korea, the instability in Nigeria – as well as concerns about Europe, the U.S. and China – why are you so bearish on gold?
Gold is a risky and highly volatile asset, silver even more so. Should everybody have some gold and silver in their portfolio? I'd say yes. But should they be massively overweighted in it – I'm not sure. Because as gold prices rise, people sell their shares, their winners, to compensate for all their losers. Second, many gold positions are highly leveraged, so any credit crunch produces margin calls and the price plummets. Unless you are a professional, you can burn your fingers.
Do you own a car?
No car, no boat, no plane. In my free time, I wear blue jeans. I love culture, the visual arts, literature. My only conspicuous consumption is contemporary art, but I usually buy young artists, even before they have gallery representation. I go to their studios. It's a passion, not an investment.
The philosopher George Steiner has suggested that the historic role of Jews in human history is to be perpetual wanderers. As you accumulate your air miles, do you see yourself in that light?
A little bit. I'm a global nomad and gypsy. Born In Turkey, raised in Israel and Italy and now New York. I've visited every continent except Antarctica several times in the past year. But wherever I go, I learn.
Michael Posner is a Globe and Mail feature writer.
This interview has been edited and condensed.