Dr. Doom 2013 Prediction Warns of Financial 'Perfect Storm' (VIDEO)
The aptly named Dr. Doom, economist Nouriel Roubini, is confident in his prediction of a global financial "perfect storm" next year as economies slow or even dip once again into recession due to a series of factors including domestic issues and possible foreign engagements.
Roubini, professor at New York University's Stern School of Business, was nicknamed "Dr. Doom" after he correctly predicted the 2008 financial crisis and explained the factors that could contribute to a worsening of the global economy.
The factors included the growing debt crisis in Europe; United States scheduled tax increases and spending cuts could lead to a second recession, the slowing Chinese economy, continued slowing of emerging markets and a possible military confrontation with Iran. Roubini also stated that many of these factors are contingent on many others, adding to the volatility of the situation.
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"Next year is the time when the can becomes too big to kick it down (the road)...then we have a global perfect storm," Roubini said during an interview with Reuters.
Roubini does expect that U.S. stocks will remain flat for the rest of 2012 and Roubini cautioned that the equity market could face a sharp contraction next year with few options to correct it.
"There might be a weak rally because people are being cheered by more quantitative easing by (Chairman Ben) Bernanke and the Fed, but if the economy is weakening, that is going to put downward pressure on earnings growth," Roubini explained.
Roubini said the Federal Reserve may be pushed toward unconventional policy options if the global economy continues on its current path.
Unconventional policy shifts may include "targeting the 10-year Treasury at 1 percent, doing credit easing rather than quantitative easing, targeting nominal GDP, price-level targeting and lots of stuff that is more esoteric," Roubini said, adding: "Eventually if everything goes wrong, they can even buy equities."
