Nouriel Roubini is a professor of economics at New York University. His résumé has all the usual line items for a high-flying practitioner of the dismal science: A Ph.D. from Harvard, stints at the IMF, World Bank and U.S. Treasury Department. As a sideline, he also runs an economic analysis firm called Roubini Global Economics Monitor, self-described as "the leading aggregator of ahead-of-the-curve information on global economic and geostrategic issues." Since two of the economics bloggers I regularly follow, Brad Setser and Felix Salmon, are employed by RGE, I thought maybe it was time to start paying some attention to what the boss was saying.
It's not pretty. You won't find a bleaker prediction of imminent recession than Roubini's post yesterday on his own blog, "U.S. Hard Landing and Recession Steaming Ahead: Now More Likely Than a 70% Probability."
The cause of this recession? A major housing bust.
The relationship between the housing sector and the overall economy is the question of the moment right now for business reporters. Some observers are scratching their head along with National Association of Realtors chief economist David Lereah, who keeps noting perplexedly that there has never been a serious housing bust while the rest of the economy was reasonably healthy. But others, led by Roubini, are vociferously certain that the housing slowdown will itself bring down the rest of the economy. A forceful iteration of these views can be found in a highly entertaining 20-page treatise of gloom and doom by Roubini, "Eight Market Spins About Housing by Perma-Bull Spin-Doctors... And the Reality of the Coming Ugliest Housing Bust Ever..."
This is called putting your reputation on the line. There is no question that the economy is slowing, but the bears are not yet out in force. Roubini is going to look a little foolish if housing settles down softly and then rebounds next year, while the economy swims merrily along. And there will be plenty of people to remind us of his predictions the next time he goes out on a limb.