Nouriel Roubini Predicts a "Perfect Storm" Coming

By Barbara Zigah

(eToro Blog) As investors ponder the unfolding events in the Eurozone, the United Kingdom and the United States, all of which have essentially rendered the respective economies just shy of impotent, one has got to believe that it simply can't get any worse. Well, hold on to your portfolio, because according to economic sage Nouriel Roubini, there's a “perfect storm” coming that will make these recent events look like a spring shower.

Mr. Roubini may just be the loudest and most listened to voice among the many critics who have pointed out that the world's fiscally troubled sovereigns have done a great job in avoiding (through delay) their fiscal responsibilities. He believes that the various governments are the understated masters of postponement, but inevitably, by 2013, a true global crisis is going to strike, and when it does, the aftermath is going to be devastating.

Here's how he sees it all playing out.

The United States will see some slow, yet steady growth in the near term; GDP will grow slightly over 2%, but be held back by the housing sector and high unemployment. The 2012 election year will create more problems for the recovery. Only spending cuts and higher taxes can take some pressure off the deficit, but very few candidates will be willing to campaign for that.

In the Eurozone, the PIGS will continue to struggle, burdened with heavy, expensive debt and little prospect for growth. If the contagion hasn't spread by then, it could be limited to the PIGS, otherwise…

Then, China, the worlds' economic driver, will rev up their inflation fighting tactics in an effort to hold inflation in the 5-6% range. And in the process, they will have curtailed economic growth, not just their own but the rest of the worlds'. China's key trading partners, i.e. Europe, Australia, etc., will suffer.

And there you have it, according to Roubini, the current events which are likely to conspire to create in 2013, the perfect storm. And what will the aftermath look like?  That's hard to specifically predict, though Roubini believes it will be wide-spread, and certainly, ugly.

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