It's a mixed bag these days. Europe appears to have arrested its fall into the abyss and the U.S. economy is finally looking up. But with a looming consensus that war with Iran is in the offing and Putin's recent return to power in Russia, geopolitical chaos lurks around the corner. Foreign Policy once again turned to Nouriel Roubini -- who's always good for a little doom and gloom -- and Ian Bremmer to make sense of the ticking time bombs. And they didn't hold back.
When asked about the consequences of war in Iran, Roubini sees prolonged high oil prices "$170, $180, $200 a barrel" and warned of the knock-on consequences: "the last three major global recessions ... were all caused by a geopolitical shock in the Middle East that led to spike in oil prices." But Bremmer's not buying all the war hype: "the Obama administration does not want to engage in military strikes against Iran -- and they sure as hell are going to resist it, no matter what -- before the elections."
When it comes to metaphors, the pair of prognosticators didn't disappoint: Roubini still sees a dark outcome in Europe -- "a slow-motion train wreck" -- while Bremmer sees the Chinese economy as a "very, very fast car" hurtling down a highway ... "the problem is that there's a bend in the road coming up and there's no steering."
But the real surprise comes at the end of the conversation, where Roubini and Bremmer both worry about instability in Moscow and Beijing bringing the two nations together -- but it might be less a case of keeping your friends close than keeping your enemies closer.
Foreign Policy: February's job numbers are out, the third straight month of 200,000-plus gains, but unemployment stays steady. Are we seeing the green sprouts of an economic recovery here?
Nouriel Roubini: My feeling is that the economic data are mixed. Certainly creating 200,000 jobs per month as opposed to only 100,000 is a positive signal. But while the data for the last 2 to 3 months were consistently surprising on the upside, some recent data suggests an element of caution. For example, real consumption spending has been flat for three months in a row. Durable goods orders -- a proxy for capital spending by the corporate sector -- are sharply down in January after the tax advantages expired at the end of last year. Construction spending is still down. Home prices are still falling. Today, the number on the trade balance in January came in worse than expected. So if you look at the macro supply data it looks better. But the demand data, whether it's consumption or residential or net exports, suggests there's still softness. More
