With GOP-Controlled Congress, Roubini Predicts US "Fiscal Train Wreck"

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Reuters

With GOP-Controlled Congress, Roubini Predicts US "Fiscal Train Wreck"

US on Track for "Fiscal Train Wreck": Roubini

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Nouriel Roubini, Professor of Economics at New York University and Chairman of Roubini Global Economics. In his piece for the Financial Times Roubini warned that the Obama admin. would have difficulty working with an "unco-operative Republican party trapped in a belief in voodoo economics, the economic equivalent of creationism." (Credit: Reuters/Mike Segar)

The
U.S. economy is a "fiscal train wreck" waiting to happen that risks
ushering in a period of stagnation featuring by minimal growth, high
unemployment and deflationary pressure, U.S. economist Nouriel Roubini
wrote on Friday.

In a commentary for the
Financial Times, Roubini -- one of the first economists to predict the
housing crash in the United States and known as 'Dr Doom' for his
pessimistic forecasts -- said fiscal and monetary stimulus had prevented
another depression.

But he said
that further quantitative easing likely to be announced by the Federal
Reserve next Wednesday will have little effect on U.S. growth in 2011,
"so fiscal policy should be doing some of the lifting to prevent a
double dip recession," he said.

He
said the U.S. remains on an "unsustainable fiscal course" and the likely
make-up of Congress after elections next Tuesday, in which the
Republicans look set for strong gains, virtually takes fiscal reform off
the agenda.

"The risk ... is that
something on the fiscal side will snap ... The trigger could be a debt
rollover crisis in a major U.S. state government," he wrote.

"The
worst of the coming fiscal train wreck will be prevented by the Fed's
easing. But the risk is (Obama) ... will then preside over ... a Japanese style stagnation, where growth is barely positive, and deflationary pressures and high unemployment linger."

(Reporting by John Stonestreet; editing by Patrick Graham)

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