Nouriel Roubini, AKA 'Dr Doom', prescribes cheer

Investing guru Nouriel Roubini isn't known for his optimism. But he is more upbeat than most on China.

In September 2006, Nouriel Roubini told an International Monetary Fund meeting that the US was in for a "once-in-a lifetime housing bust and a deep recession", says Stephen Mihm in The New York Times. With mortgage-backed securities crashing worldwide, the global financial system would come to a "shuddering" halt.

Nobody paid much attention to the New York University economics professor back then. But within a couple of years he was a household name. Throw in other pessimistic soundbites and an "aura of gloom", as Mihm puts it, and you can see why he's known as 'Dr Doom'.

Yet Dr Doom, unlike many pundits, is not worried about China. Pessimism about the Middle Kingdom's recent stockmarket collapse is "excessive, unreasonable and irrational", he told The Daily Telegraph's Ambrose Evans-Pritchard last week.

Markets have swung from complacency about China to undue alarmism. Everyone thought the economy was humming along, then suddenly there was talk of growth slowing to 3%, or even 0%. But neither extreme is right. "The slowdown in China is neither a hard landing nor a soft landing it's a bumpy landing.

It could be better managed, but growth is not likely to be worse than 6.5% this year and 6% next year."The stockmarket has scant impact on the economy, while the state stands behind the banks and can avert a financial sector meltdown. People have "misinterpreted" the liberalisation of the yuan's exchange-rate regime as the beginning of a devaluation that could spread deflation across the world.

The global economy does look fragile, reckons Roubini, although it bodes well that the developed world's fiscal policies are loosening. The lack of liquidity in bond markets has become the biggest worry for him in recent months. "As more investors pile into overvalued, increasingly illiquid assets such as bonds the risk of a long-term crash increases."

Recommended

Andrew Hunt: why it's a great time to be a deep value investor
Value investing

Andrew Hunt: why it's a great time to be a deep value investor

Merryn talks to Andrew Hunt, author of Better Value Investing, about his adventures in the market's dark underbelly, looking for the hated and neglec…
22 Oct 2021
Back on track: why you should invest in railways
Share tips

Back on track: why you should invest in railways

Rail transport suffered a severe blow in the pandemic. But while post-Covid-19 working patterns may reduce revenue, trends in technology, long-distanc…
22 Oct 2021
China’s economy faces a triple shock
Chinese economy

China’s economy faces a triple shock

Power cuts, the pandemic and the property slowdown are slowing China's economy down.
22 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021

Most Popular

How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
The after effects of the gas-price shock
Economy

The after effects of the gas-price shock

In the wake of the recent spike in the natural gas price, we can expect slower growth, an industrial recession – and a newly assertive Russia, says Ma…
17 Oct 2021