Opinion: Roubini’s Revenge and the rise of the realist

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Roubini is getting attention mainly because he’s been right with his calls.

What his critics might not have noticed is that their own credibility is now on the line. The United States economy is not having a free trip to Disneyland anywhere but in their patter about avoiding a recession which is already destroying the lives and homes of millions of Americans.

Delusion is only a marketable commodity when it’s not killing the people you’re trying to sell it to. Talk is cheap, but the perception is that the people doing the talking are much cheaper, and much nastier, than Roubini’s tough talk.

I did a piece on his work a while back, about his 12 steps to disaster. I called it 12 steps to hell.

So far, he’s been describing a process that’s neither unbelievable or incomprehensible. It’s real, it’s happening, and it’s happening now.

You'd never guess that from the sleazy apologia issuing from every hired economic orifice on Wall Street. The sheer gutlessness of economists not to refer to the vicious series of events which have been disemboweling American capital is nothing less than obscene. Even the motormouth political machines are running scared, talking about everything but the economy, and trying to get folksy-cutesy where head kicking and disaster prevention is the primary consideration.

The New York Times, referring to a talk Roubini gave to the economic world’s answer to Where’s Waldo, the IMF, in 2006:

In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.

The IMF, in my opinion, is the Gestapo of global economics. A useless, disgusting failure of an organization which has probably done more damage to humanity than most wars. It presided like a corporate Goering over the Third World loans, and other nauseating triumphs of modern poverty.

But then, I’ve always been an optimist.

Anyway, Roubini didn’t get much of a hearing, when predicting what is arguably the worst economic series of blows to the United States in history. He’s still criticized for his views, for various reasons, and the mathematical model sophistry is still current.

Just for the record, economics and formulae don’t necessarily mesh. Economics is an extremely complex science for number crunching. Factoring in everything, let alone unstable factors like the insane US housing situation, simply doesn’t produce a nice spreadsheet. Imagine trying to put together a formula to give a dollar balance to the US financial sector. It’s ludicrous.

When everybody, on both sides of politics and business, start reciting the same statements, endlessly, something has to be badly wrong. Roubini, Bloomberg, and a handful of others have been among the few to say something else.

If the financial crises have been the nadir of financial journalism, with so few exceptions, economics has turned itself into a spectator on its own subject. All that’s needed are big foam hands and hats.

Economics has to decide if it’s a science or a fan club. If there’s an endangered species in America, it’s the critic of anything to do with money. Any series of events, apparently, can pass with minimal comment, and almost no substance.

Which raises the question:

If Roubini can speak for himself, (his blog is an adequate testimony to that) why can’t the parade of happy piglets in the financial media? Has someone managed to convince themselves they know what they're talking about with this slopfest of soggy innuendo they're trying to pass off as the state of the American economy? Only Bloomberg seems to be determined to come up with hard facts and unpalatable information. The New York Times tries, but some of its commentary seems limp wristed on the subject of a situation which is verbosely maiming New York’s own bottom line. You could put the rest in a photocopier, in terms of actual information and addressing issues.

Roubini’s elevation to the rank of those who are listened to is obviously overdue, but it’s a good sign. Someone has apparently woken up to the fact that people who know what they’re talking about are more valuable than those who you pay millions a year to tell you what you want to hear:

As a result, Roubini, a respected but formerly obscure academic, has become a major figure in the public debate about the economy: the seer who saw it coming. He has been summoned to speak before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. He is now a sought-after adviser, spending much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. Though he continues to issue colorful doomsday prophecies of a decidedly nonmainstream sort — especially on his popular and polemical blog, where he offers visions of “equity market slaughter” and the “Coming Systemic Bust of the U.S. Banking System” — the mainstream economic establishment appears to be moving closer, however fitfully, to his way of seeing things. “I have in the last few months become more pessimistic than the consensus,” the former Treasury secretary Lawrence Summers told me earlier this year. “Certainly, Nouriel’s writings have been a contributor to that.”

God knows, the fools might even be able to find the United States on the map one day.

It’d be a nice change.