Wednesday, November 13, 2013

Roubini says central bankers have a tough choice: Kill recovery or risk bubbles

In the aftermath of the financial crisis six years ago, unconventional tools like quantitative easing and zero-interest rate policies may have sparked an economic recovery but not one of turbocharged growth or low unemployment. That puts policy makers between a rock and a hard place, NYU economist Nouriel Roubini wrote in an opinion piece at Live Mint on Wednesday. He added:
“Policymakers will eventually face an ugly trade-off: kill the recovery to avoid risky bubbles, or go for growth at the risk of fueling the next financial crisis.”

One problem is that much of the excess liquidity created by these unconventional policies has gone into the the financial sector rather than the real economy, encouraging carry trades that make for frothy financial markets, Roubini said.

Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics