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Prophet Motive

This year, Nouriel Roubini, the economist known to the general public as Dr. Doom, Prophet of the Financial Apocalypse, spent the early hours of Mardi Gras on the floor of the Frankfurt Stock Exchange. It was only 11 a.m., but the party was rollicking. Traders careened around the floor, hooting and honking, dressed as dragons and devils and convicts. Rock music roared overhead, and no one seemed to care that, by the bye, the market had tanked. Tickled, Roubini registered the flicker of amusement on his Twitter thread: "Nouriel is at the Frankfurt Stock Exchange," he wrote, "where everyone is dressed in Mardi Gras costumes even if the market is down 2.5%."

Roubini has always been a bon vivant--a trait that has mesmerized the tabloids ever since Facebook photos surfaced of him, the professional pessimist, partying ... with women. But, today, there was no time to celebrate. First, he had to go see Axel Weber, head of the nearby German Central Bank, to discuss "how the German taxpayer is going to have to bail out the lazy Italians and the lazy Greeks," who were up to their eyebrows in debt. Then there was a panel discussion with finance gurus Robert Merton and Stephen Ross; there were clients to counsel, a keynote address to deliver, and e-mails, hundreds of e-mails, slowly piling up in the BlackBerry on his belt. By the time he responded to the ones worth responding to and updated his blog, it was nearing 4 a.m., and he only had time to sneak in a few hours of sleep before another day of flights, meetings, conferences, and TV appearances.

When I caught up with Roubini three days later, he was draped over a booth in an Upper East Side diner, his hair rumpled, collar undone. The speckled blue tie he had worn on Maria Bartiromo's show that afternoon was gone. His speech was still a rapid spit-out of facts and favored metaphors (the government "cannot be half-pregnant" with the banks), with modifiers in just the wrong places ("I was all day long giving talks"), but it was disembodied: Roubini was wiped and having a hard time propping himself up.

Now that his early prophesies of a "bloodbath" have come to pass, Roubini's star is at its apex, and everyone wants a little ray of its gloomy light. This includes his editors at Forbes, The Wall Street Journal, and a growing number of other publications; his students at NYU, where he is a popular tenured professor; and his consultancy's swelling portfolio of clients--the World Bank, IMF, 50 central banks, and 30-odd finance ministries among them. He also appears on CNBC almost every day. He is a curious presence on the network--the antipode to its yawping, fratty ethos--and he is trotted out to play the foil, delivering bad news with a dark and steady gaze, punctuated by the occasional impish smile. It's good for business, Roubini admits, but he makes no secret of his contempt for the network's roster of "perma-bulls who declare that this is the dramatic and cathartic event that signals the bottom of the crisis, and recovery is three months ahead."

"What a delusion," Roubini sniffs.

Though he hasn't attacked the Obama administration's policies with Paul Krugman's fury, and though he is no longer the most bearish of the bears, his short-term outlook is still quite bleak: a 36-month downturn, double-digit unemployment, and sluggish, recessionary growth well into 2010. At best.

Roubini is widely seen as an incorrigible pessimist, and, in the years leading up to the crisis, this nose for doom pitted him against his more cautious colleagues in the academy and the regulatory agencies, as well as the ebullient in-house economists at banks and hedge funds. Even those who predicted a downturn didn't recognize the extent of the problem. They homed in only on certain pet indicators--trade imbalances, say--and saw a temporary, contained recession in the works. Roubini, on the other hand, saw something else entirely. Like a good mechanic or internist, he understood the wiring. He knew, for instance, that current-account deficits were integral to the housing bubble, and that those two factors linked up to countless other factors at home and abroad. So he took what, back in 2004, was just a hunch--there is a foreign-financed bubble in the United States--and eventually pushed it, step by logical step, into a Socratic cul de sac: We are headed for an unmitigated financial disaster that will completely change the way the world does business and leave no one untouched. The theory seemed far-fetched, even hysterical--until it came true.

By calling the recession, Roubini has traveled from the Jeremiah wilderness to become one of the world's central economic authorities. So, does he have a unique ability to penetrate data, or was he simply a relentless pessimist the business cycle was eventually bound to vindicate? Is he our great economic seer, or did he just get lucky?

Roubini can be a pleasantly phlegmatic man, but, whatever the topic, he almost always positions himself as a clear-eyed outsider battling against the half-wits. "Silly" is one of his favorite adjectives, as is "ridiculous." When we met in New York, he wasted little time in dismantling the myth of his newfound stardom. "People sometimes write these articles saying, 'He was an obscure academic professor and now he's become a rock star,'" he said, one arm absently bumping an increasingly irritated man enjoying a club sandwich behind him.

Then there is the problem of Roubini's pop-culture image: Dr. Doom, the partying pessimist. He hates both parts of the packaging. "In many ways the Dr. Doom moniker is inappropriate," he punched into his BlackBerry, unprompted, one very early morning in New Delhi. "I turned out to be much more of a realist than a pessimist, grounded in reality rather than living in a bubble of delusions about how bad things would get." And he flares at any mention of his reputation as a playboy, accusing Nick Denton, the publisher of Gawker Media and the main peddler of these allegations, of anti-Semitism (Denton's mom is Jewish).

If Roubini slides easily into the role of victim, it's a stance that his ancestral history may have predisposed him to. The Roubinis are from Mashad, a city on the eastern fringe of Iran and the resting place of the Imam Reza, the eighth of the twelve Shia imams. This made Mashad a major religious hub and, thus, a difficult place for its Jewish community, the Roubinis included, to live. The city's Muslims and Jews, however, managed to maintain a tense equilibrium for centuries until, in 1839, a Jewish woman got a strange prescription for an abscess on her hand: cut open a puppy, stick your hand in its innards, hold for an hour. She carefully followed the Muslim doctor's advice, but got the timing wrong, killing the dog on a major Muslim feast day. This was interpreted as a mockery of the holiday, and the town exploded in violence. When it was over, 36 Mashadi Jews were dead and the rest were forced to convert to Islam, an event that came to be called the Allahdad. For the next century, until the Iranian state slowly loosened its grip in the 1940s, the Jews had to secretly keep their faith while maintaining an elaborately Islamic facade.

The trauma of the Allahdad forged a strong insularity among the Mashadi Jews, one they maintain even in the exile of Long Island and Israel--and it gave them the sense that the unimaginably bad is nearly always possible. "It's like a big tribe," Roubini says. "They mate among each other; they don't even mix with other Jews."

Roubini himself was born in 1958, not in Mashad, but in Istanbul, where his parents had a short layover before moving on to Tehran, Tel Aviv, and, finally, Milan, where the family set up its Oriental rug business and lives to this day. Because they arrived in Italy when they were young, Nouriel and his two brothers, born one after the other in the span of 21 months, were able to duck right into Italian society (though they spoke Farsi at home) and, in the typical way of first-generation immigrant children, disappear. The Roubini boys came to immerse themselves in politics during the 1970s, when Italy was rocked by social unrest and domestic terrorism; according to his youngest brother David, Nouriel began leading student assemblies on the events of the day. "I was like everybody else, the son of a good upper-middle-class family, and like many of my generation, I was socially conscious," Roubini says. "I wanted to make the world a better world. And, probably, my interest in economics came from my interest in politics."

The interest was largely incomprehensible to Roubini's parents. In the Mashadi community, a boy was expected to go into his father's line of work; many didn't finish high school. "Unlike Ashkenazi Jews, Middle Eastern Jews put less emphasis on education," Nouriel explains. "They were more about business. There was no particular impetus to learn. So I'm a little bit like an outsider because I broke out of it."

He has remained an outsider ever after, never fully inhabiting any role or place since his grad-school days at Harvard, when he was able to pursue a blend of academic economics with tangible questions of policy. After seven years of teaching at Yale, he was drawn south, to New York, to fill the cultural void that New Haven had opened in his life. (He missed the opera in particular. At one Yale party, an advisee's wife walked in on Roubini and four other economists ripping through the Catalogue Aria from Don Giovanni, a list of the paramour's conquests: "In Italy, six hundred and forty;/In Germany, two hundred and thirty-one;/A hundred in France; in Turkey, ninety-one;/But in Spain already one thousand and three.")

But, at NYU in the mid-'90s, he wasn't fully comfortable, either, and was drawn south again--this time to the policy battles of Washington, where he served briefly at the World Bank and the IMF, before deciding to abandon academia for a while and adopt the life of a bureaucrat at the White House and Treasury (where he was Timothy Geithner's adviser). That, too, did not satisfy him for long. Two years later, he was back in New York, trying again to fuse economic policy with theory, and, in 2005, he added another element to the mix: RGE Monitor, a multimillion-dollar international consultancy.

The crisis has blessed Roubini with fame, wealth (mid-recession, RGE is still growing), and odes from his peers. Nassim Taleb, who also predicted a catastrophe in his book The Black Swan, calls Roubini "the best living economist"; heavyweights like Brad Setser, Simon Johnson, and Kenneth Rogoff were nearly as flattering in their appraisals. And yet, Roubini still sees himself as outnumbered and put-upon, the man no one will listen to until it is too late.

He also bristles at anything that smells remotely of constriction. When two people from the notoriously on-message Obama campaign approached Roubini and asked him to come onboard last year, he declined. Though Roubini had been happy doing policy in the late '90s, he had chafed at working longer days for half the money, and his recommendations were being shorn of their Roubini-esque fullness. "When I was in government, every word I said in public, I had to clear it with general counsel," Roubini says. "I prefer to be a free thinker and be able to write daily without having to worry about that."

Before they left for Washington late last year, he told his old colleagues Geithner and Larry Summers that, though they were free to contact him, he was happy directing policy indirectly, on television or on his blog. "I cannot do everything," he says. "You have to choose."

Some economists--strict academics mostly--have long considered Roubini a quack. They sneer at his approach, which is wide, deep, and deeply unconventional. When he travels, for instance, he says his research includes talking to "everyone from the airport cab driver all the way to the finance minister." One prominent economist who studies recession indicators recently slammed Roubini for his "subjective," "wild man" predictions because they don't always rely on econometric modeling. And Roubini certainly didn't help his case at an IMF conference in September 2006, when he guesstimated the chances of a world recession at 70 percent before offering, by way of explanation, that he had pulled the number "just out of my nose."

Anirvan Banerji, an economist with the Economic Cycle Research Institute, has been particularly dismissive of Roubini's forecasting abilities: "The average time between recessions is about five years in the postwar period," he says. "So, if you forecast a recession one year and it doesn't happen, and you repeat your forecast year after year ... at some point the recession will arrive."

And Roubini has undeniably overshot. In 2004, he predicted that the oncoming recession would precipitate the crash of the dollar. The crisis has mainly buoyed it. On September 1, 2005, three days after Hurricane Katrina made landfall, Roubini told Reuters that economic disaster was imminent. What followed instead was a bump in financial activity that forestalled the recession for more than two years.

All the while, though, Roubini understood better than anyone just how weak the fundamentals of our economy were. The day after the now-famous 2006 IMF talk, he went on "Kudlow & Company," on CNBC. Roubini was, as always, the foil to Kudlow's chipperness. "All my friends are in a great mood, Nouriel. They're in a terrific mood. They love America," Kudlow sang. Roubini countered starkly: "Well, they're all rich," he said. "The average American actually is in debt"--a sign to Roubini that housing would only be the catalyst of something larger.

What sets Roubini apart from his fellow economists (and what occasionally gets him in trouble) is his willingness to intuit broad patterns and connect the dots, something that became apparent early in his career. While others spent years refining one econometric model or drilling down on one microsubject, Roubini gorged on a range of diverse topics that, to him, were all related: Japanese public debt, tax evasion, liquidity and exchange rates, monetary policy in the newly formed European Union, the effect of political cycles on industrial economies. As a graduate student, he attracted the attention of older, more established academics both for his ambitiously sweeping econometric analyses and his ability to synthesize vast swaths of seemingly unrelated information.

But the first real test of Roubini's eclectic methodology didn't come until 1997. That summer, the government of Thailand--highly in debt and over-leveraged after a long and poorly regulated real-estate boom--cut its currency from its peg to the dollar. Investors panicked, and Thailand's surging economy froze, triggering massive layoffs in real estate, finance, and construction. The crisis, which quickly spread to the rest of the region, took most economists by surprise.

Roubini, by then a young professor at NYU, was trying to stay on top of the rapidly shifting situation in Asia for a class he was teaching. He found it nearly impossible until he hit on a relatively new technology: a website. He hired some students versed in HTML and set up the Asia Crisis Homepage. The bright yellow portal pooled news reports, academic work, and policy debates on the subject, filtering, organizing, and contextualizing the information in real time under no fewer than 32 headings.

Wading through the data on Thailand, Roubini found that corruption and bad policy created a vacuum that sucked in a flood of foreign capital. This skewed the country's financial reality and accelerated an unsustainable boom. (Roubini later spotted this distinctive pattern in the United States when the Chinese, Russians, and Gulf states were hungrily snapping up U.S. debt and inundating the market with foreign cash.) But, at the height of the Asian financial crisis, Roubini was, again, in the minority. Many economists saw it as a simple comedy of errors: Misinformed investors panicked, they said, and pulled the rug out from under the Thais. Roubini, on the other hand, saw the crisis as a systemic failure rooted in Thailand's policies. And he was right.

More than a decade later, Roubini-ism--sprawling, non-linear, and hypercaffeinated--looks pretty much the same. His prescient February 2008 blog post that predicted the Rube Goldbergian collapse of the world financial system, for example, was called "The Twelve Steps to Financial Disaster," but, if you include all the sub-steps and sub-sub-steps, the real number is likely twice that. On television, his talking points are similarly pluralized, rushing out quickly, like a magician's scarves, to a grand and logical finale. (At the diner, I clocked him: 295 words on the intricacies of the European monetary crisis in under 90 seconds.) This, of course, means that brevity goes out the window. Roubini's weekly Web column for Forbes comes in at close to 3,000 words and runs at half that length. A recent Roubini academic paper tracks no less than 47 emerging countries over the course of 32 years using more than 50 variables. Giancarlo Corsetti, who was Roubini's advisee at Yale and is now a frequent collaborator, presents with Roubini at conferences, and sometimes finds this expansive approach frustrating. "I go up, I present one or two points," Corsetti says. "Nouriel goes up and gives you twenty-six points, three or four of which are contradictory."

Robert Shiller, who also worked with him at Yale and was one of the first people to warn of a housing bust, isn't surprised that Roubini, of all the great minds staring down our financial future, emerged as the one to piece it together. "A financial crisis needs general thinking, and a team of specialists will have difficulty understanding the whole thing," he says. "Nouriel's approach has always been worldwide, which is not rewarded in academia. There's an element of luck in everything, but it's not random who he is."

This is what the life of a prophet looks like: Two days after we met at the diner, Roubini is back at the airport. He's off on another long jag--four continents, seven countries, eight cities, ten days.

He's been thinking a lot not just about the way down but the way out. With the help of the Obama administration's policies (not great, he says, but better than nothing), he sees "a light at the end of the tunnel." To actually get to the end of it, though, the United States will have to get used to consuming less, which means China, Germany, and Japan will have to get used to producing less, which means that all the intermediaries--Chile, Australia, Brazil--will have to scale back and turn inward like everyone else. The world may curve and warp a bit, and it will be difficult, but Roubini sees good in this. Given the right changes, perhaps the United States can develop with the productive long view in mind, and maybe its human talent can be spread more equitably. "When you have more financial engineers than computer engineers, you know that the brightest minds have gone into something where, probably, the margin was excessive," he had told me earlier. "Maybe some of these bright people are going to do something entrepreneurial, more creative, or go into government. I think that's actually a good change. The transition is painful, but the result may be good."

On the other end of the line, I can hear him fumbling with his luggage as he talks, and there's a sense of noble resignation in his tone. He hasn't had any rest since we met, but, he insists, "I cannot get sick. I can't stop." His is hard, life-shortening work, but someone has to tell the world that only its wholesale rewiring will get us out of this.

Julia Ioffe is a writer living in New York.