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World financial crisis 'not over' | World financial crisis 'not over' |
(1 day later) | |
The US economist widely credited with having predicted the financial crisis has warned we are already "planting the seeds of the next crisis". | The US economist widely credited with having predicted the financial crisis has warned we are already "planting the seeds of the next crisis". |
Nouriel Roubini told the BBC that he is concerned about the growing gap between the "bubbly and frothy" stock markets and the real economy. | Nouriel Roubini told the BBC that he is concerned about the growing gap between the "bubbly and frothy" stock markets and the real economy. |
Over the last six months, the Dow Jones Industrial Average has risen about 45%. | Over the last six months, the Dow Jones Industrial Average has risen about 45%. |
But Mr Roubini says he sees an economy where consumers are "shopped out" and "debt burdened". | But Mr Roubini says he sees an economy where consumers are "shopped out" and "debt burdened". |
'Crisis not over' | 'Crisis not over' |
Based on the run up in share prices in recent months, investors appear to be betting that good times are around the corner. A view not shared by Mr Roubini. | Based on the run up in share prices in recent months, investors appear to be betting that good times are around the corner. A view not shared by Mr Roubini. |
"The crisis is not yet over," the New York University professor said. | "The crisis is not yet over," the New York University professor said. |
I think that there is a growing gap between what is the asset prices and the real economy Nouriel Roubini | I think that there is a growing gap between what is the asset prices and the real economy Nouriel Roubini |
"I see an economy where the consumers are shopped out, debt burdened, they have to cut back consumption and save more. | "I see an economy where the consumers are shopped out, debt burdened, they have to cut back consumption and save more. |
"The financial system is damaged... and for the corporate sector I don't see a lot of capital spending because there is a glut of capacity." | "The financial system is damaged... and for the corporate sector I don't see a lot of capital spending because there is a glut of capacity." |
Mr Roubini believes US house prices have further to fall, straining America's fragile recovery. | Mr Roubini believes US house prices have further to fall, straining America's fragile recovery. |
'Frothy markets' | 'Frothy markets' |
Property prices have already declined sharply. According to the National Association of Realtors, the national median has dropped almost 13% from a year ago to $177,700 (£110,100). | Property prices have already declined sharply. According to the National Association of Realtors, the national median has dropped almost 13% from a year ago to $177,700 (£110,100). |
Many believe the crises in the residential market could spread to the commercial real estate market causing more headaches for the banks. | Many believe the crises in the residential market could spread to the commercial real estate market causing more headaches for the banks. |
So where does the "froth" in the markets come from? | So where does the "froth" in the markets come from? |
Mr Roubini - like many other economists - believes it is engineered by the Federal Reserve and the government which has been pumping cash into the economy to dampen the pain of the recession. | Mr Roubini - like many other economists - believes it is engineered by the Federal Reserve and the government which has been pumping cash into the economy to dampen the pain of the recession. |
"There is a wall of liquidity chasing assets," he said. "But I think that there is a growing gap between what is the asset prices and the real economy." | |
Although he thinks there will be a correction, he believes some of the mistakes of the past can be avoided if reforms are implemented . | Although he thinks there will be a correction, he believes some of the mistakes of the past can be avoided if reforms are implemented . |
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