Dr. Doom cracks a smile

Yes, the economy is improving, Nouriel Roubini says. But huge problems still lurk for the US and Europe.

By Kim Peterson Jan 26, 2011 2:06PM
Economist Nouriel Roubini. Credit: (© Chiang Ying-ying/AP)Wait a minute. Could Dr. Doom actually be feeling optimistic these days?

Noted economist Nouriel Roubini -- known for his gloomy predictions of financial upheaval -- actually admitted a global economic recovery is taking place. "Balance sheets are strong, confidence is rising," he said today at the World Economic Forum in Davos, Switzerland.

Fantastic -- we're back on track! Well, not so fast. If you follow Roubini, you know there's a "but" lurking in there somewhere. And here it is: But the possibility of a double-dip recession is still very real, he added.

Check out this video report for more news from Davos (post continues after video):
Here are the pots that Roubini said could bubble over, according to The Associated Press:

Slow growth: In the U.S. and Europe, unemployment is high and the economy's growth is still very slow.

Real estate: The U.S. still struggles with a real estate crisis.

Debt: The U.S. is still mired in debt, with a deficit that is still out of control. The latest numbers say the government's deficit is slated to hit a record $1.5 trillion this year, driven by the stumbling economy and recent tax-cut legislation. "The public debt in the U.S. may go next year from 60 to 90% of GDP," he told Bloomberg Television.

Europe's wrong strategy: Markets in Europe responded to the financial crisis with crushing austerity measures that endanger growth.

China complications: There's not enough exchange-rate adjustment, which could trigger currency wars, or even eventually trade wars and protectionism.

"In the U.S., the fiscal problem is very serious," he told Bloomberg. "The bond vigilantes have not woken up in the U.S. in the same way as in the eurozone. Unless the U.S. starts to address this fiscal problem, we're going to see a train wreck."


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