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Bearer of Bad News

August 19, 2008

This week’s New York Times Magazine has a profile of New York University economist Nouriel Roubini, whose gloom-and-doom predictions have been startlingly spot-on. Roubini, Ph.D. ’88, predicted the U.S. economy’s current conditions with chilling accuracy.

Roubini’s pessimistic prognostications have won such supporters as Cabot professor of public policy Kenneth S. Rogoff; Jeffrey Sachs ’76, Ph.D. ’81, who was the founding director of Harvard’s Center for International Development but left in 2002 for Columbia University, where he heads the Earth Institute and teaches sustainable development, health policy, and management; and Eliot University Professor Lawrence H. Summers, all quoted in the article. (Summers’s own views about the U.S. economy will appear in the September-October issue of Harvard Magazine; Web publication is imminent.)

But Roubini has critics, too: one is quoted as saying, “Even a stopped clock is right twice a day.”

So what does he foresee in the coming months and years? Roubini says the housing crisis is far from over, and predicts that defaults on mortgages, credit cards, auto loans, student loans, etc., will drive numerous banks into bankruptcy. “A good third of the regional banks won’t make it,” he told article author Stephen Mihm.

And Roubini says the U.S. national debt will bring international tensions to a head and force the United States to accept a different role on the international stage. “Once you run current-account deficits, you depend on the kindness of strangers,” he says. “This might be the beginning of the end of the American empire.”

Harvard Magazine examined the hazards of the current account deficit last year in “Debtor Nation,” an article that also quoted Rogoff and Summers.