Weekend Economists Examine (E)sc(h)atology January 24-26, 2014

[xchrom]

72. ROUBINI: We Just Saw A 'Mini Perfect Storm'

http://www.businessinsider.com/nouriel-roubini-mini-perfect-storm-2014-1

Our Q&A is below.

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What was the main theme at Davos this year?

Probably the biggest one was the rising tension between China and Japan. People are starting to make comparisons to 1914: You have a rising power facing an existing power, and in the past that has led to war.

Of course, it's not inevitable, but both the Japanese side and even the Chinese side have made bellicose statements. So I hope diplomacy can succeed but I'd say that that was one of the big stories.

How big of a risk to the world economy are the troubles we've seen in emerging markets recently?

I was in a panel in plenary session about emerging markets, and I said that I think what happened last year might repeat itself this year. You still have, on the one side, concerns about the Chinese economic slowdown, there are concerns about how fast the Fed tapers and raises interest rates, commodities prices are becoming softer, many of these countries have not done structural reforms, and many of them have a lot of fragility, have lax monetary credit and fiscal policy.

And now there is a layer of political uncertainty, with the "Fragile Five" having parliamentary or presidential elections: India, Indonesia, Turkey, Brazil, South Africa. There's also additional political uncertainty coming from other places like Ukraine, places like Argentina, places like Thailand, that affects markets.

So what happened this week was a bit of a mini perfect storm between Chinese PMI of 50, Argentina letting its currency go, noises coming politically from Ukraine, Turkey, and Thailand … so the contagion is not just within emerging markets but also affects advanced economies' equity markets.



Read more: http://www.businessinsider.com/nouriel-roubini-mini-perfect-storm-2014-1#ixzz2rVrDPMgC