Upsides and Downsides in the Global Economy and Financial Markets
The outlook for the global economy and financial markets is mixed. The positives and upside include a pick-up in global growth after years of a new mediocre, profitable corporate firms, better business and consumer confidence, more optimistic investors with markets in risk-on mode, the rise of emerging markets, new technologies and innovation. The downside, however, are several: uncertainties about Trumponomics, the risks of European and Eurozone dis-integration, the potential for a hard landing of highly indebted China, the sluggish global growth and productivity in a world of high private and public debts, the frothiness in financial markets and the risks of assets and credit bubbles fed by easy monetary policies, the backlash against globalization and geopolitical risks. Markets are now bullish, but the economies are still sluggish. Roubini argues that a new policy framework is needed to minimize the downsides and maximize the upsides.
Globalization, Technology and Their Discontents
There recently has been a populist backlash against globalization in its many manifestations: free trade, migration, technological innovation and supra-national governance. This backlash is also associated with the rise in income and wealth inequality and the concerns that large parts of populations have seen their jobs and incomes threatened by the various elements of globalization. At the same time robotics, AI and automation may over time threaten lower skilled blue collar workers, as well as white collar jobs and wages even more than trade and migration. How severe is this backlash and its political manifestations in the form of the rise of populist leaders? Are protectionism, trade wars and sharp restrictions to migration the new norm or can globalization be improved and saved? Is the future of AI utopian or dystopian for workers? What are the appropriate policy responses to make sure globalization benefits most - rather than a few? Roubini provides a roadmap and answers to these questions.
US Economic and Financial Outlook
Uncertainties remain about the economic policies of Trump and their impact on the US economy and markets. Since the presidential election, investors have become bullish - pushing financial markets to new highs and giving businesses and consumers confidence -- in spite of still sluggish growth. Investors hope fiscal stimulus, infrastructure spending, tax reform and deregulation will boost growth and markets. A honeymoon can continue for quite a while if positive policies are properly implemented. But markets may be overestimating Trump’s ability to deliver positive policy changes and the impact of such changes on a potential growth that is kept low by longer term and structural forces. Markets may also be underestimating some of the potential negatives of Trumponomics: protectionism and the risk of trade wars; restrictions to migration that may slow growth in an ageing society; inefficient micro-management of the decisions of the corporate sector on where to produce, invest and hire; a sub-optimal policy mix with loose fiscal policy in an economy close to full employment that will force the Fed to tighten sooner and more; that could lead to higher interest rates and a stronger dollar that will hurt jobs and growth. Roubini argues that the jury is still out on whether Trumponomics will be more populist and protectionist or more mainstream and pragmatic, even if the latter scenario looks more likely.
Nouriel Roubini is the Chairman of Roubini Macro Associates, LLC, his own global macroeconomic consultancy firm. He is also a professor of economics at New York University’s Stern School of Business. Dr. Roubini has extensive policy experience as well as broad academic credentials. From 1998 to 2000, he served as the senior economist for international affairs on the White House Council of Economic Advisors and then the senior advisor to the undersecretary for international affairs at the U.S. Treasury Department, helping to resolve the Asian and global financial crises, among other issues. The International Monetary Fund, the World Bank and numerous other prominent public and private institutions have drawn upon his consulting expertise.
He has published numerous theoretical, empirical and policy papers on international macroeconomic issues and coauthored the books Political Cycles: Theory and Evidence (MIT Press, 1997) and Bailouts or Bail-ins? Responding to Financial Crises in Emerging Markets (Institute for International Economics, 2004) and Crisis Economics: A Crash Course in the Future of Finance (Penguin Press, 2010). Dr. Roubini’s views on global economic issues are widely cited by the media, and he is a frequent commentator on various business news programs. He has been the subject of extended profiles in the New York Times Magazine and other leading current-affairs publications. The Financial Times has also provided extensive coverage of Dr. Roubini’s perspectives.
Dr. Roubini received an undergraduate degree at Bocconi University in Milan, Italy, and a doctorate in economics at Harvard University. Prior to joining Stern, he was on the faculty of Yale University’s department of economics.