You can watch the interview in the video below.
Economist Nouriel Roubini says the risk of a global recession is greater than 50 percent, and the next two to three months will reveal the economy’s direction. In an interview with WSJ’s Simon Constable, Roubini also says he’s putting his money in cash. “This is not the time to be in risky assets,” he says.
If you have a hard time understanding Roubini’s accent and low pitched voice, you may want to read the article, Nouriel ‘Dr. Doom’ Roubini: ‘Karl Marx Was Right’. (Of course that headline is enough to drive the tea partiers right out of their gourd without them even listening to what Roubini said.)
Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.
Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.
The (paradox)2 is that if everyone followed Roubini’s solution of going to cash, we would have the self-destruction of capitalism that Roubini describes as a paradox. Rather than call it (paradox)2 it might be better termed self-reflexive paradox à la George Soros.
Now that you have seen the play, you can read the script yourself at Is Capitalism Doomed?. This is a link to Nouriel Roubini’s blog post which he just about recited in the video interview above.