RSS Feed (xml)
crisis has warned we are already "planting the seeds of the next
crisis". Nouriel Roubini told the BBC that he is concerned about the
growing gap between the "bubbly and frothy" stock markets and the
real economy. Over the last six months, the Dow Jones Industrial
Average has risen about 45 %. But Mr Roubini says he sees an economy
where consumers are "shopped out" and "debt burdened". 'Crisis not
over' Based on the run up in share prices in recent months, investors
appear to be betting that good times are around the corner. A view not
shared by Mr Roubini. "The crisis is not yet over," the New York
University professor said. " I think that there is a growing gap
between what is the asset prices and the real economy Nouriel
Roubini "I see an economy where the consumers are shopped out, debt
burdened, they have to cut back consumption and save more. "The
financial system is damaged... and for the corporate sector I don't
see a lot of capital spending because there is a glut of capacity."
Mr Roubini believes US house prices have further to fall, straining
America's fragile recovery. 'Frothy markets' Property prices have
already declined sharply. According to the National Association of
Realtors, the national median has dropped almost 13 % from a year ago
to $177 , 700 (£110 ,100). Many believe the crises in the residential
market could spread to the commercial real estate market causing more
headaches for the banks. So where does the "froth" in the markets come
from? Mr Roubini - like many other economists - believes it is
engineered by the Federal Reserve and the government which has been
pumping cash into the economy to dampen the pain of the recession.
"There is a wall of liquidity chasing assets," he said. "But I think
that there is a growing gap between what is the asset prices and the
real economy." Although he thinks there will be a correction, he
believes some of the mistakes of the past can be avoided if reforms
are implemented .
