Nouriel Roubini & George Soros

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Nouriel Roubini
New Keynesian economics
Nouriel Roubini 05.jpg
Birth March 29, 1959 (1959-03-29) (age 50)
Istanbul, Turkey
Nationality  Turkey
 United States
Institution New York University
Field International economics
Alma mater Harvard University (Ph.D. 1988)
Bocconi University (B.A. 1982)
Influences John Maynard Keynes
Hyman Minsky
Larry Summers
Jeffrey Sachs
Information at IDEAS/RePEc

Nouriel Roubini (born 29 March 1959) is a professor of economics at the Stern School of Business, New York University and chairman of Roubini Global Economics, an economic consultancy firm.

After receiving BA in political economics at Bocconi University and doctorate in international economics at Harvard University, he began academic research and policy making by teaching at Yale while also spending time at the International Monetary Fund (IMF), the Federal Reserve, World Bank, and Bank of Israel. Much of his early studies focused on emerging markets. During the administration of President Bill Clinton, he was a senior economist for the Council of Economic Advisers, later moving to the United States Treasury Department as a senior adviser to Timothy Geithner, who is now Treasury Secretary.

In 2008, Fortune magazine wrote that: "In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage."[1] In September 2006, he warned to a skeptical IMF that: "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."[2] He also foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". The New York Times labeled him "Dr. Doom", whereas, in hindsight, IMF economist Prakash Loungani has called him "a prophet".[2]

As Roubini's descriptions of the current economic crisis have proven to be accurate, he is today a major figure in the U.S. and international debate about the economy, and spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia.[2]. Although he is ranked only 410th in terms of lifetime academic citations,[3] Prospect Magazine, in January 2009, voted him #2 on its "list of the world’s 100 greatest living public intellectuals".[4] In 2009, Roubini was ranked #4 on Foreign Policy magazine's list of the "top 100 global thinkers", and named one of the 100 most influential people in the world by Time magazine.[5][6] He has recently appeared before Congress, the Council on Foreign Relations, and the World Economic Forum at Davos.



Early life and education

Nouriel Roubini was born in Istanbul, Turkey. The child of Iranian Jewish parents, his family moved to Tehran, Iran, when he was two. He later lived in Israel and Italy to attend university and moved to the United States to pursue his business doctorate in international economics at Harvard University.[2] He is currently a U.S. citizen and speaks English, Persian, Italian, and Hebrew. He has never married and lives in Manhattan.[7]

Roubini spent one year at the Hebrew University of Jerusalem before moving to Milan, Italy, where he received his B.A., summa cum laude, in economics from the Bocconi University in 1982. He received his Ph.D. in international economics from Harvard University in 1988. According to his academic adviser, Jeffrey Sachs, he was unusual in his talent with both mathematics and intuitive understanding of economic institutions.[2] In an interview in June 2009, when asked about his best investment in life, he replied, "I think investing in a good education has been key for me, although the investment was more in time than money."[7]


For much of the 1990s, Roubini combined academic research and policy making by teaching at Yale and then in New York, while also spending time at the International Monetary Fund, the Federal Reserve, World Bank and Bank of Israel. Currently, he is a professor at the Stern School of Business at New York University. He spent much of his time working on emerging market blowouts in Asia and Latin America which helped him spot the looming disaster in the U.S. "I’ve been studying emerging markets for 20 years, and saw the same signs in the U.S. that I saw in them, which was that we were in a massive credit bubble," he said.[8]

By 1998, he joined the Clinton administration first as a senior economist in the White House Council of Economic Advisers and then moved to the Treasury department as a senior adviser to Timothy Geithner, then the undersecretary for international affairs and now Treasury secretary in the Obama administration. [8]

Roubini returned to the IMF in 2001 as a visiting scholar while it battled a financial meltdown in Argentina. He co-wrote a book on saving bankrupt economies entitled Bailouts or Bail-ins? and opened his own consulting firm.

Role models

He credits a number of economists for his understanding of economics. He said, "One person who has had a great impact on me intellectually was my adviser at Harvard, Jeffrey Sachs. For me he’s the model of a great intellectual. He is both a rigorous academic and very human, involved in big picture issues such as poverty, AIDS, and Africa. He’s someone with a great mind that is also very engaged with the world. Another intellectual hero is Larry Summers, the former President of Harvard, an amazing intellectual and academic, who is very deeply involved with the policy world. I worked for him for many years in the US Treasury during the Clinton Administration".[9]

Global nomad

He likes to refer to himself as a "global nomad", and says, "You can be sitting still surfing the Internet, and experience other worlds, ideas and societies. But I’ve found that there is nothing better than visiting a different country, even if for three days. ... you can’t only be a virtual Global Nomad, with goggles on, in a virtual reality. You have to be there. You have to see it, smell it and live it. You have to see people, travel, and interact."[9]

Partly to fulfill this need, he became chairman of RGE, an economic consultancy for financial analysis. In describing the purpose of RGE Monitor, he said, "the world is my home, so everything about society and culture — no matter how miniscule [sic] — is worth knowing. I am an information junkie and created RGE Monitor to collect information about what’s happening around the world."[9]

In late 2009, after a period of fast growth, RGE Monitor changed its name to, retiring the old RGE Monitor site.

Speaking of his early influences, Roubini said, "I was born into a relatively orthodox Jewish family in Iran, lived in Israel and Turkey, and then moved to Italy as a child. By the age of six, instead of going to a yeshiva, I went to a secular Jewish school where I interacted with kids from all sorts of different backgrounds. Had I gone to an orthodox Jewish school, I would perhaps be orthodox now and may have never become a Global Nomad."[9]

Personal investments

During an interview in June 2009, he was asked about his personal lifestyle expenses and other investments. He said, "I regularly save about 30% of my income. Apart from my mortgage, I don’t have any other debts. The credit crunch hasn’t affected me much. . . . I’ve always lived within my means and, luckily, have never been out of work. I would say I’m a frugal person — I don’t have very expensive tastes. . . . You don’t need to spend a lot to enjoy things."[7]

Asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities — about 75% — but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%. . . . I don’t believe in picking individual stocks or assets. . . . Never invest your money as though you are gambling at the casino. Buying and selling individual stocks is a waste of time."[7]

Economic forecast

U.S. economy

In the 1990s, Roubini studied the collapse of emerging economies. He used an intuitive, historical approach backed up by an understanding of theoretical models to analyze these countries and came to the conclusion that a common denominator was the large current account deficits financed by loans from abroad. Roubini theorized that the United States might be the next to suffer, and as early as 2004 began writing about a possible future collapse.[2] Business Week magazine writer Michael Mandel, however, noted in 2006 that Roubini and other economists often make general predictions which could happen over multi-year periods.[10]

In September 2006, he clearly saw the end of the real estate bubble: "When supply increases, prices fall: That’s been the trend for 110 years, since 1890. But since 1997, real home prices have increased by about 90 percent. There is no economic fundamental—real income, migration, interest rates, demographics—that can explain this. It means there was a speculative bubble. And now that bubble is bursting." In the Spring 2006 issue of International Finance, he wrote an article titled "Why Central Banks Should Burst Bubbles" [11] in which he argued that central banks should take action against asset bubbles. When asked whether the real estate ride was over, he said, "Not only is it over, it’s going to be a nasty fall."[12]

By May 2009, he felt that analysts expecting the U.S. economy to rebound in the third and fourth quarter were "too optimistic." He stated, "Certainly the rate of economic contraction is slowing down from the freefall of the last two quarters." He expects negative growth to the end of 2009, and feels that during 2010 the recovery is still going to be weak,"[13] with the full recession lasting 24 or 36 months, and a possibility of an "L-shaped" slow recovery that Japan went through in The Lost Decade.[14] But in fact, the US economy started to grow in mid 2009 just like the optimistic analysts forecasted.[15]

In his opinion, much of the current recession's cause is due to "boom-and-bust cycles," and feels the U.S. economy needs to find a different growth path in the future. "We’ve been growing through a period of time of repeated big bubbles," he said. "We’ve had a model of 'growth' based on overconsumption and lack of savings. And now that model has broken down because we borrowed too much." He feels that too much human capital went into financing the "most unproductive form of capital, meaning housing" and would like to see America create a model of growth in more-productive activities. He feels that "sustainable growth may mean investing slowly in infrastructures for the future, and rebuilding our human capital," by investing in renewable resources. "We don’t know what it’s going to be," he says, "but it’s going to be a challenge to find a new growth model. It’s not going to be simple."[16]

Recovery from recession

In August 2009 Roubini predicted that the global economy will begin recovering near the end of 2009, but the U.S. economy is likely to grow only about 1 percent annually during the next two years, which is less than the 3 percent normal "trend."[17] He notes that the Fed is "now embarked on a policy in which they are in effect directly monetizing about half of the budget deficit," but that as of now "monetization is not inflationary," as banks are holding much of the money themselves and not relending it. At some point, however, probably by 2011, he sees the recession ending, and "banks will want to lend the money; people and businesses will want to borrow and spend it." Then it will be time for an "exit strategy, of mopping up that liquidity" and taking some of the money back out of circulation, "so it doesn’t just bid up house prices and stock values in a new bubble. And that will be 'very, very tricky indeed,'" he states.[16] However this prediction proved to be wrong when the US economy grew 3.5% in the third quarter of 2009, and contracted only 0.7% in the second quarter of 2009, showing that the economy is recovering earlier and much more robustly than Roubini expected.[15]

Also, in late July he warned that if no clear exit strategy is outlined and implemented, there was the potential of a perfect storm: fiscal deficits, rising bond yields, higher oil prices, weak profits, and a stagnant labor market, which combined could "blow the recovering world economy back into a double-dip recession."[17]

Global economy

As of January 2009, he remained pessimistic about the U.S. and global economy. He said in September, 2008, "we have a subprime financial system, not a subprime mortgage market".[18] "As the U.S. economy shrinks, the entire global economy will go into recession. In Europe, Canada, Japan, and the other advanced economies, it will be severe. Nor will emerging market economies—linked to the developed world by trade in goods, finance, and currency—escape real pain."[19] He was quoted in South Africa's 2009 budget speech for his role in predicting the current financial crisis in the developed markets.

Roubini notes that the subprime issues are a global, and not just a U.S. problem. In an interview with author James Fallows in late spring of 2009, he stated, "People talk about the American subprime problem, but there were housing bubbles in the U.K., in Spain, in Ireland, in Iceland, in a large part of emerging Europe, like the Baltics all the way to Hungary and the Balkans. It was not just the U.S., and not just 'subprime.' It was excesses that led to the risk of a tipping point in many different economies."[16]

His pessimism is focused on the short-run rather than the medium or long-run.[2] In Foreign Policy (Jan/Feb 2009), he writes, "Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst". "[19]

At a conference in Dubai in January, 2009, he said, the U.S. banking system was "effectively insolvent." He added that the "systemic banking crisis.... The problems of Citi, Bank of America and others suggest the system is bankrupt. In Europe, it’s the same thing."[20] To deal with this problem, he recommends that the U.S. government "do triage between banks that are illiquid and undercapitalized but solvent, and those that are insolvent. The insolvent ones you have to shut down." He adds, "We're in a war economy. You need command-economy allocation of credit to the real economy. Not enough is being done," he felt at the time.[21]


Roubini met officials in China during spring 2009, and points out that many Chinese commentators blame American "overborrowing and excess" for dragging them into a recession. However, he states that "even they realize that the very excess of American demand has created a market for Chinese exports." He adds that although Chinese leaders "would love to be less dependent on American customers and hate having so many of their nation’s foreign assets tied up in U.S. dollars," they’re now "more worried about keeping Chinese exporters in business. . . . I don’t think even the Chinese authorities have fully internalized the contradictions of their position."[16]


Professor Roubini is the author of several books, including: Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies,[22] Political Cycles and the Macroeconomy,[23] and New International Financial Architecture.[24]


Professor Roubini's research interests include:

Current appointments


  1. ^ "Eight Who Saw it Coming" Fortune, Aug. 2008
  2. ^ a b c d e f g Mihm, Stephen (August 15, 2008). "Dr. Doom". New York Times. 
  3. ^ Ideas
  4. ^ Crabtree, James. Chosen #2 of world's 100 greatest living intellectuals, Prospect Magazine, January, 2009
  5. ^ Krugman, Paul (April 30, 2009). "The 2009 TIME 100: Scientists & Thinkers". Time (,28804,1894410_1893209,00.html. Retrieved November 2, 2009. 
  6. ^ "The FP Top 100 Global Thinkers". Foreign Policy (Washington, D.C.: The Washington Post Company). December 2009. ISSN 00157228.,3. Retrieved November 30, 2009. 
  7. ^ a b c d "Fame and Fortune: Nouriel Roubini" Times Online, June 21, 2009
  8. ^ a b "Roubini Sees Global Gloom After Davos Vindication", Bloomberg TV, January 30, 2009
  9. ^ a b c d >"Talking to Nouriel Roubini", Janera Magazine, May 2, 2007
  10. ^ March 21, 2006"The Problem With Prediction Registries"
  11. ^ Article Abstract, International Finance, Spring 2006
  12. ^ "The Descent", New York Magazine, Sept. 24, 2006
  13. ^ "Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says" Bloomberg, May 7, 2009
  14. ^ "Roubini Says Recession May Continue Until End of 2010" Bloomberg, March 6, 2009
  16. ^ a b c d Fallows, James. "Dr. Doom Has Some Good News", The Atlantic magazine, July/August, 2009
  17. ^ a b "Roubini Sees Risk of ‘Double Dip’ Global Recession" Bloomberg News, July 23, 2009
  18. ^ "Bailout: No cure for recession", CNN Money, Sept. 24, 2008
  19. ^ a b Roubini, Nouriel. Warning: More Doom Ahead Foreign Policy, January/February, 2009
  20. ^ "Roubini Predicts U.S. Losses May Reach $3.6 Trillion" Bloomberg News, January 20, 2009
  21. ^ "Roubini Sees More Economic Gloom Ahead", Time, March 3, 2009
  22. ^ Roubini, Nouriel; Setzer, Brad (August 2004). Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Economies. Peterson Institute. ISBN 0881323713. 
  23. ^ Alesina, Alberto; Roubini, Nouriel; Cohen, Gerald D. (1997-11-14). Political Cycles and the Macroeconomy. The MIT Press. ISBN 0262510944. 
  24. ^ Roubini, Nouriel (ed.); Uzan, Marc (ed.) (2006-02-28). New International Financial Architecture. Edward Elgar Publishing. ISBN 978-1-84376-808-1. 

External links


From Wikipedia, the free encyclopedia

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Monetization is the process of converting or establishing something into legal tender. It usually refers to the printing of banknotes by central banks, but things such as gold, diamonds and emeralds, and art can also be monetized. Even intrinsically worthless items can be made into money, as long as they are difficult to make or acquire. Monetization may also refer to exchanging securities for currency, selling a possession, charging for something that used to be free or making money on goods or services that were previously unprofitable.



Monetizing debt

In the United States, and in many other countries, the government does not have the right to issue new currency to pay its bills – it must instead finance the deficit by issuing new bonds and selling them to the public to acquire the necessary money to pay its bills. However, if these bonds do not end up in the hands of the public, the only alternative is for them to be purchased by the central bank. For the bonds not to end up in the public hands the central bank must conduct an open market purchase. This action by the central bank increases the monetary base through the money creation process. This process of financing government spending is called monetizing the debt.[1] Monetizing debt is a two step process where the government issues debt to finance its spending, the central bank purchases the debt from the public and the public is left with high powered money.

Effects on inflation

When government deficits are financed through this method of debt monetization the outcome is an increase in the monetary base, or the money supply. If a budget deficit persists for a substantial period of time then the monetary base will also increase, shifting the aggregate demand curve to the right leading to a rise in the price level.[2]

To summarize: a deficit can be the source of sustained inflation only if it is persistent rather than temporary and if the government finances it by creating money (through monetizing the debt), rather than leaving bonds in the hands of the public.[3]


Monetizing the debt can be used as a component of quantitative easing strategies, which involve the creation of new currency by the central bank, which may be used to purchase government debt, or can be used in other ways.

Revenue from business operations

In some industry sectors, monetization is a buzzword for adapting non-revenue-generating assets to generate revenue. Failure to monetize web sites was a problem that caused many businesses to fold during the dot-com bust. Web sites that do generate revenue are often monetized via advertisements or subscription fees.

Monetization of non-monetary benefits

Monetization is also used to refer to the process of converting some benefit received in non-monetary form (such as milk) into a monetary payment. The term is used in social welfare reform when converting in-kind payments (such as food stamps or other free benefits) into some "equivalent" cash payment. From the point of view of economics and efficiency, it is usually considered better to give someone a monetary equivalent of some benefit (say, a litre of milk) than the benefit in kind.

Environmental Monetization

The process of development, or exploitation of the resources of any area of land, or water, often accruing to the benefit of a limited number of people, and the damage to the exploited environment. This leads to using up resources faster than they can be replaced. In 2008, the World Wildlife Fund estimated that the human species is using up natural resources at a rate 1/3 faster than they can be replaced. [4].

Russian social welfare monetization of 2005

In 2005 Russia transformed most of its in-kind benefits into monetary compensation.

Before this reform there were a large system of preferences: free/reduced price of travels on local transport, free supply of drugs, free health resort treatment, etc. for diverse categories of society: military personnel, the disabled, and separately, persons disabled due to WWII, Chernobyl disaster "liquidators," inhabitants of Leningard during the siege, former political prisoners, and just for all pensioners (women 55+, men 60+). This system was a legacy of Soviet Union, but it was heavily extended by populist laws of central and regional authorities during 90s.

By the law 122-ФЗ of 22 August 2004 this system was converted into cash payments by various means:

The main causes of friction in the reform were the following:

The wave of protests emerged in various parts of Russia in the beginning of 2005 as this law started to work. But government measures (raising of compensations, normalisation of bureaucratic mechanisms, etc.) eventually neutralized opposition.

The long-term effects of the monetization reform varied for various groups. Some people received compensation in excess of the services they received (e.g. in rural areas without any local transport, the free transport benefit was of little value), some have found that the compensation is insufficient to cover the cost of the benefits needed. Transport companies and railroad have obvious benefits from monetization as they receive higher cash receipts when these categories use their services (previously in some regions more than a half of passengers did not pay for municipal transport, without sufficient compensation to the companies from the government). Effects on medical system are controversial. Doctors and nurses have to use their time to fill in many forms to justify free receipts, thus reducing time spent on services.

United States agricultural policy

In United States agricultural policy, "monetization" is a P.L. 480 provision (section 203) first included in the Food Security Act of 1985 (P.L. 99-198) that allows private voluntary organizations and cooperatives to sell a percentage of donated P.L. 480 commodities in the recipient country or in countries in the same region. Under section 203, private voluntary organizations or cooperatives are permitted to sell (i.e., monetize) for local currencies or dollars an amount of commodities equal to not less than 15% of the total amount of commodities distributed in any fiscal year in a country. The currency generated by these sales can then be used: to finance internal transportation, storage, or distribution of commodities; to implement development projects; or to invest and with the interest earned used to finance distribution costs or projects.[5]


  1. ^ The Economics of Money, Banking, and the Financial Markets 7ed, Frederic S. Mishkin
  2. ^ The Economics of Money, Banking, and the Financial Markets 7ed, Mishkin
  3. ^ The Economics of Money, Banking, and the Financial Markets 7ed, Mishkin
  4. ^ "Living Planet Report 2008". World Wildlife Fund. Retrieved 2009-03-22. 
  5. ^ CRS Report for Congress: Agriculture: A Glossary of Terms, Programs, and Laws, 2005 Edition - Order Code 97-905

See also