Roubini’s Real Track Record

I’m glad to see Charles Gasparino’s column on Nouriel Roubini’s overhyped reputation:

A closer inspection of Roubini’s record shows that while he was predicting doom and gloom for the US in 2004, his initial call had nothing to do with a runaway housing bubble.

Rather he argued that the Bush Administration was racking up massive deficits to foreign investors, namely the Chinese, and that the Chinese would scale back on their purchases of US debt, causing interest rates to spike and the dollar to decline in value, resulting in “financial trainwrecks for the US economy in a matter of a couple of years.”

Sounds good, but the problem with the theory is that it didn’t happen.

While I’m as worried as anyone else about the Chinese financing US domestic spending, it should be noted that there’s little sign that they’re about to stop, even with the Obama administration making President Bush look like a deficit hawk.

Based on my research, it wasn’t until about August 2006 that Roubini began talking about a housing crisis, and he was hardly alone. Several economists and investors, from John Paulson to Stan Druckenmiller and around this time Goldman Sachs, were also predicting the housing decline.

Roubini, for his part, wasn’t available for comment, but a spokesman said in a statement that he has “built a strong and rapidly growing business,” and has more than “1,000 institutional clients.”

Maybe so, but how do they feel about his call on the price of gold? Last year he predicted that the rising price of gold was in fact a bubble, just like the housing one a few years earlier, and like housing, it would burst as well. But as we all know gold prices remain strong.

For the record, I think Roubini is a very smart guy and well worth listening to. But I don’t believe he predicted the financial crisis.

There are currently 837,000 Google matches for the search “predicted the financial crisis.” The top one, as it turns out, was written by me.

If so many people saw it coming, it’s a wonder how it happened.

Posted by on October 11th, 2010 at 4:13 pm


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