Roubini and Bremmer on Charlie Rose: Unveiling New Abnormal
After the Great Recession, commentators have espoused their idea of the “New Normal”—a post-growth era of stagnant developed economies. But is it so simple? Nouriel Roubini and Ian Bremmer appeared on Charlie Rose to discuss their take on what the new paradigm will be like. Roubini differentiated what he is calling the “New Abnormal”:
“Our point is that this situation is one that is not a stable equilibrium, is not even a stable disequilibrium. It’s an unstable disequilibrium. Take for example the eurozone. You cannot have just a monetary union without banking, political, economic, fiscal union. Either you move towards more integration or you’re going to have more fragmentation and disintegration. So the situation we face right now in the global economy, same in the eurozone, is of a unstable disequilibrium, therefore a new abnormal, that cannot be sustained.”
The “New Abnormal” stems from the patchy, anemic recovery from the global financial crisis, Roubini explained, touching on the roots of the crisis:
“It’s been anemic because the financial crisis was one, first in which it was too much debt, leverage and excessive risk taking in the private sector, households, banks, financial institutions, even corporates. And now is the result of the resolution of financial crisis were the search of public debt and deficits. Historically, whenever you start with too much private and public debt, there is a painful period that can last over a decade, where growth is going to be anemic. Why? Because you have to spend less, to save more or dissave less to gradually reduce this tox of deficit and debt. And that implies that economic growth has been very weak in the United States, in Europe, in Japan and other advanced economies. And that’s going to continue. Eventually, that slow economic growth is associated with rising unemployment rate, and also with social and political unrest. That’s the situation we’re facing right now – is unstable disequilibrium, is the new abnormal. We’re ahead of decade of very low economic growth.”
An imperfect policy response has exacerbated the situation:
“In part we needed monetary easing, to try to avoid and prevent this Great Recession from becoming the Great Depression, but liquidity has been like a drug, a palliative, it doesn’t resolve the disease, you have to do fundamental, structural changes that’s going to increase the productivity. For example in Europe, if you don’t do them, liquidity just buys you time, but creates zombie firms, zombie households, zombie countries and governments.”
To see what Bremmer and Roubini had to say about global conditions, watch the interview at Charlie Rose.
4 Responses to “Roubini and Bremmer on Charlie Rose: Unveiling New Abnormal”
Our investment world is built on a foundation of faith and trust, if that begins to crack or crumble, real problems quickly form. People quickly forget how an economy grinds to a halt when suppliers or factories refuse to ship without securing "payment up-front". Unfortunately much of what we see and are told is a lie, and that is a fact, remember MF Global and Enron. Economist often talk of headwinds and tailwinds, much of what has been done in recent years has acted as a "artificial tailwind" but this is not a normal state and cannot be sustained. In the post below I reflect on what happens when the momentum ends, the adjustments needed for the economy to succeed have not been made and governments have squandered the precious time that they were given,
I will admit to being rather confused here, if corporations and banks can get away without paying taxes and dictate court case outcomes as well as determine their will over actual legislation, then why all of these fiscal crisis? —to wit unstable disequilibrium? Does structured chaos work? It must —wars abound, banks are the source of the real debt problems, but full audits are unimaginable—corporations dictate and pollute at will —no real change- seems like business as usual? Your opinions make it sound as though there are choices—by whom and where?
Oh, I forgot all the financial problems are to be borne by taxpayers/voter/depositors—privatizing all things governmental as well as resources —–taxes in governmental coffers will be used up. Then what?
Despites the QE the unemployment level is 7.6%.
QE has led to Artificial Asset & Stock boom in Emerging Market.
This strategy,of Printing Currency Notes to create Paper employment is Unsustainable as is the overhyped Asset & Stock Prices in EM.
The scary question is what will happen when QE is withdrawn on Employment,Asset Prices & Stocks.
We are living in very interesting times.