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Wednesday, August 17, 2011

Roubini: Why the Economy is Sputtering.

Posted by on Wed, Aug 17, 2011 at 12:06 AM

You must read this crisp essay by (probably the most accurate and honest) economist Nouriel Roubini.

Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.

Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.

To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.

A simply brilliant distillation of all that is wrong with the world's economy. Too much money in the hands of too few, who have little idea what to do with it.


Comments (26) RSS

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Krugman's take on Roubini's been interesting over the years. The main thing needing to be done right now is to blow the whistle on impossibly cruel, frightening and ultimately economically useless austerity programs. In that light, this whole article reads like a laundry list of stuff to make up for not doing that, for refusing to advocate fiscal spending on a scale that would restore full employment. Not reduce unemployment; restore full employment.

Roubini's strong suit is warning. But I'd look to Krugman for ways out.
Posted by gloomy gus on August 17, 2011 at 1:09 AM · Report this
"....and the continental European model of deficit-driven welfare states...... BROKEN"

The troll has been tellong slog for years that your
is morally and financially

Too many hipsters who pay
ZERO Federal Income taxes
expect the government to
fill their every need,
who long to be just like Europe.....

The deficit 'crisis' in the USA
is a manufactured political contest.
The money to pay the debt (and more) is there,
there is just disagreement on wether the nation
should continue to borrow/spend
(it shouldn't; and it won't....)

the HomoLiberalSocialist's WetDream Society,
is a far different story....

Europe is LITERALLY bankrupt.

They have promised extravagant benefits for too long and are obligated for commitments THEY CAN NOT MEET.

The Money Isn't There.....

The riots in Europe are what happens when the spoiled amoral leech moocher class finds out Nanny's Teats are going dry...

Look for a replay coming to a city near you.....

Posted by BurnBaby!Burn! on August 17, 2011 at 2:13 AM · Report this
Supreme Ruler Of The Universe 3
Think about the things that are not happening.

Lack of housing
Scarce resources

The problem for 'jobs' is that we are awash in goods and products like Android that are delivering the power of a magic wand and it fits in your back pocket.

The economy is Disneyland. But if you work at Disneyland, you don't make enough money to visit Disneyland; however you get free passes.

In the future, we will all work for Disneyland and we will all get free passes.
Posted by Supreme Ruler Of The Universe on August 17, 2011 at 2:29 AM · Report this
I have seen a lot of decent diagnosing of the problems. I've also seen a fair amount of proposing of, if not solutions, solid steps in the right direction.

What I consistently fail to see in these articles is how the solutions being offered can ever be implemented without the use of a magic wand. Yes yes I understand that government investment in infrastructure would help stimulate the economy and yes I understand that the economic sector needs a major overhaul and yes I know that there must be very heavy consequences attached to playing chicken with the world economy.

What I would like to know is what path these many geniuses can offer to get such desperately needed reforms past impossibly corrupt political systems. How do you get rid of the fox when its his job to guard the hen house? How to you impose economic reforms using a political system where elected officials are almost all drawn from the class that most benefits from the current system and who depend almost entirely on the rulers of that system to ensure their re-election?
Posted by Lynx on August 17, 2011 at 3:37 AM · Report this
Fifty-Two-Eighty 5
Well, that's the question, isn't it, Lynx?

We are so fucked.
Posted by Fifty-Two-Eighty on August 17, 2011 at 4:01 AM · Report this
It's in the interest of the super wealthy to pay their fair share of taxes, as Warren Buffet himself recently said. With the growing inequalities of wealth distribution, violent means, not taxes, is what is going to redistribute that wealth. When people get desperate, they don't give a shit about rule of law anymore.
Posted by Smell on August 17, 2011 at 6:01 AM · Report this
Okay, so the Anglo-Saxon method doesn't work, and the European method doesn't work. Is the a method anywhere that DOES work? Or are we supposed to revert to some chicken-and-gourd based system?
Posted by Yeek on August 17, 2011 at 7:01 AM · Report this
Rotten666 8
Are we still pretending that the London riots were a desperate cry for help from the lower class and not an outburst of opportunistic criminality by the bored middle class?

Posted by Rotten666 on August 17, 2011 at 7:37 AM · Report this
@8, so far as I can tell the London riots were opportunistic criminality by the lower class, though I don't doubt that at least some opportunistic middle and upper class punks gladly joined them (not that you could doubt it, since it's been documented).

What I really want to know is just where in the post or the article you find the slightest reference to the riots, let alone a justification for them?
Posted by Lynx on August 17, 2011 at 7:43 AM · Report this
seandr 10
The Europeans are doing capitalism correctly, more or less. (Only caveat is entrepreneurial innovation, which we seem to do better at).

Ours is a global economy, however, so when American real estate ponzi schemes and wall street gambling rings come crashing down from their over-inflated heights, Europe is inevitably dragged down with us.

Note that if/when the economic downturn becomes frightening and painful enough, our population's politics will lurch leftward as they did in the 30's. The conservative movement is largely the product of 50 years of being spoiled by a healthy economy and comparatively limited warfare. The go-it-alone cowboy fantasy that fuels that movement quickly looses its appeal when you're not sure where dinner is coming from.
Posted by seandr on August 17, 2011 at 8:58 AM · Report this
@1 gloomy, Roubini's book Crisis Economics details proposals for the way out.
Posted by neo-realist on August 17, 2011 at 9:12 AM · Report this
@11, sure, and now that you mentioned it, here's Krugman and Robin Wells last year on its strengths and shortcomings.…
Posted by gloomy gus on August 17, 2011 at 9:15 AM · Report this

They can always shoot their horse...
Posted by COMTE on August 17, 2011 at 9:16 AM · Report this
@10 You know the left keeps says this. And I wish people would think this kind of thing through: That when it all comes crashing down then we'll have some sort of social renaissance.

You know what I call this? The James Bond Super-Villain Fantasy School of Social Change. Like how Bloefeld pet's his white cat and blows up the moon so he can take over and lead a utopia of sexy platinum blonde super-men.

So basically the word economy crashes and millions of people will have to become destitute and starve for decades before we finally see the big denouement in American political perspective? Great.

Fact is if it all crashes there is no proof we will have anything other than MORE poverty and misery and MORE entrenched wealth in the hands of the few.

Praying for another miraculously enlightened and fabulously connected rich dude like FDR (and what... the economic engine of WWIII?) to lead us out of disaster seems dubious and rather far fetched.

There is no big event or Deus Ex Machina that is gong to save anybody. It's going to be slow, hard, deliberate, boring work. Frankly i'd like to prevent that crash if at all possible.

Sure. Maybe none of it will pay off and things might get worse anyway. That's reality, right there. But rather than just sit and wait for the Big Crash and then cross our fingers and pray something better rises out of the ashes I'd like to work on something better before the crash.
Posted by tkc on August 17, 2011 at 9:37 AM · Report this


the 30s....

Hitler. Stalin. Tojo...

those were some fucking awesome times.

(you are impressively stupid, dear)
Posted by the 10s on August 17, 2011 at 9:47 AM · Report this
Just as the nightmare of agricultural life, the more pleasant nightmares of white and blue collar life will only end when what they produce becomes variously unwanted or much cheaper to produce with no or few people.

At that point we either live more freely or indulge in S&M on a societal scale, maintaining the jobs system that would work better as such a game than as a way of getting and enjoying...and might already be so.

Unfortunately, there are many rich people who get off on the real equivalent of the Abominable Fallacy.
Posted by Gerald Fnord on August 17, 2011 at 9:48 AM · Report this

what is the "Fair Share"
for the 50% who pay ZERO Federal Income taxes?

and when it gets "violent" what makes you think the poor will not get screwed over even worse than at present?

"to the barricades, Hipsters!!"

thats funny.....
Posted by JeanPa├║l on August 17, 2011 at 9:50 AM · Report this
seandr 18
Jesus, the last thing I want is shitty economy. You must be confusing me with Charles Mudede, who gets an erection at any sign of a economic disorder.

I'm just pointing out the political consequences of an economic depression, I am by no means pitching depression as a political strategy.

Posted by seandr on August 17, 2011 at 10:00 AM · Report this
Max Solomon 19
more likely amurka will turn towards an incompetent quasi-fascist like palin/perry/bachman/ryan/etc. than leftwards. 60 years after mccarthy drove a stake in the heart of the american left, there is no commonly held narrative of resistance to economic injustice except that of conservatism - which is pretty fucking ironic. that's the only place "the masses" know to turn to understand why they're being fucked. an ideology scripted and funded by the plutocracy. we're fucked as fucked can fuck.

Posted by Max Solomon on August 17, 2011 at 10:14 AM · Report this
Would it be so hard to start a jobs program aimed at putting people to work repairing crumbling bridges, schools, roads and other infrastructure? I'd love to see the Dems run on that and have some kind of WPA/CCC-style mass hiring. Call it something other than stimulus and it wouldn't be too tough a sell to the American people.
Posted by Subdued Excitement on August 17, 2011 at 10:36 AM · Report this
The super rich can't figure out what to do with their money? You're wrong. They're spending it building themselves sovereign free-floating nations with no laws, to get away from the rest of trying to build an actual society.…
Posted by Donna on August 17, 2011 at 11:14 AM · Report this
Will in Seattle 22
All about not collecting taxes from the Rich.

Currently, 50 percent probability that Greece will be dropped from the ECB and the common currency, btw.
Posted by Will in Seattle on August 17, 2011 at 11:37 AM · Report this

the LiberalSocialistWelfareState is turning Greece into a third world economy.

more to follow.....
Posted by dbd7373 on August 17, 2011 at 1:04 PM · Report this
As is usually the case, Nouriel manages to prattle on and on without every saying anything of a definite nature:

"To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods."

Spoken like a true fan of Soros and the other global speculators who roil the markets and impoverish the rest of us.

Roubini, of course, is a member of that lobbyist group for the international ultra-rich, the Bretton Woods Committee ( Whenever fluff and econ-gobbledigook is required, count on one of those members to provide it:

Roubini, Blinder, Rogoff, Kissinger, etc., etc.

@10, seandr:

"Ours is a global economy, however, so when American real estate ponzi schemes and wall street gambling rings come crashing down from their over-inflated heights, Europe is inevitably dragged down with us."

You're far too accepting and taking everything at face value. The entire Wall Street setup has been structured as a Ponzi-Tontine scheme, and that real estate "ponzi scheme" you mentioned wasn't even a drop in the bucket, sonny, nor was there ever any actual "wall street gambling rings" -- again repetition of TV memes.

The situation is far more simple: the banksters peddled junk paper, also called securitized debt, to extend what was once the normal leveraging ration of $1 on hand for every $8 loaned out, to $1 on hand for every $1,000, or $10,000, or $100,000 loaned out; i.e., credit derivatives based upon credit derivatives based upon credit derivatives based upon credit derivatives, etc., with the underlying securitization.

This allowed for further ultra-leveraged speculation of (1) debt, (2) oil/energy, (3) commodities, etc., and is still taking place, of course.

There was very little actual gambling going on, as they have been reimbursed ("bailed out") for that junk paper they peddled, at least for a limited amount as of yet, but it will take approximately 20 years of massive debt deflation to equal those trillions and trillions of dollars they peddled in credit derivatives (estimates range from $600 trillion to over $1.2 quadrillion).

This was what led up to the Great Crash (1929) and the following Great Depression; securitization in share form, while in the present it has been securitization in bond form.

Just because you heard some jackal and jackhole from the Bretton Woods Committee ( on Foxtard, NPR, CNN, ABC, or CBS spew it forth, don't make it so!
Posted by sgt_doom on August 17, 2011 at 1:12 PM · Report this
@6, Smell,

"It's in the interest of the super wealthy to pay their fair share of taxes, as Warren Buffet himself recently said."

Again, another commenter who takes everything literally, at face value and superficially.

Warren Buffet reguarly spews BS --- truthful yes, but always something he hypocritically and intentionally does the opposite of.

Buffet claimed that credit derivatives (securities based upon debt, with mountains of securities based upon those securities, etc.) are "weapons of financial mass destruction", yet when congress appeared to be moving to do something about them under the recent Dodd-Frank Act, Buffet rushed in to buy up several corrupt congress creatures to circumvent any changes.

Buffet isn't obligated to practise tax avoidance, yet he always does and will continue to do so.

Note his recent tax dodge in donating billions to the Gates Foundation (tax writeoff), which will then turn around and invest in Buffet's various funds.

The other day I was standing in front of the SAM when one of those godawful tourist Ducks went by and their guide on board claimed that the art in the Seattle Art Museum was worth over $1 billion. is valued at $1 billion, which meant that many foundations bought artwork at....say, $10,000, then donated it to the museum for $50,000 (claiming a valuation upwards, making a profit of $40,000 on the tax writeoff).

Nobody forces the psychopathic greedheads to do that, but they always will........
Posted by sgt_doom on August 17, 2011 at 1:21 PM · Report this
@4, lynx,

"What I would like to know is what path these many geniuses can offer to get such desperately needed reforms past impossibly corrupt political systems."

Of course, "these many geniuses" are part of the corruption, and intertwined with the corrupted politicians as those same influence groups which buy up the politicians, also have placed, promoted and purchased these very same geniuses.

Anyone who has ever bothered to peruse the membership of the following, and compared those membership lists, almost immediately realizes this.

Five most influential power groups in America:

(1) Bretton Woods Committee (

(2) Group of Thirty (

(3) Trilateral Commission (

(4) Peterson Institute (

(5) Council on Foreign Relations

Many recognizable names will be found there.
Posted by sgt_doom on August 17, 2011 at 1:27 PM · Report this

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