The New Dr. Doom: Same as The Old Dr. Doom

The New Dr

The New Dr. Doom: Same as The Old Dr. Doom

Henry Kauffman was known as Dr. Doom in the 1980's at Salomon Brothers when interest rates were around 16% and each time he would speak the S&P 500 Pit would explode in noise and volume. All Prop Traders at Salomon were already short in front of the statement from Henry (which at the time they released on the wires) and if you were a desk watcher (which I was), I would get a clue that something was coming. Henry was the old Dr. Doom and Nouriel Roubini is the New Dr. Doom, and also may I say thatare both right most of the time....

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."

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