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By Joe Campbell
January 28th, 2009

“There is nowhere to hide,” Roubini, an economics professor at NYU’s Stern School of Business who predicted the financial crisis, said from Zurich in an interview with Bloomberg Television. “We have for the first time in decades a global synchronized recession. Markets have become perfectly correlated and economies are also becoming perfectly correlated. This is not your kind of traditional minor recession.” [my emphasis

Nouriel Roubini was one of the economists whose analysis I latched onto in the immediate aftermath of the collapse of Lehman Brothers. His writing makes a lot of sense, especially recently. But I’m sure I’m not the only person tired of hearing people identified as someone “who predicted the financial crisis.”

Many of these people who “predicted the financial crisis” have been predicting the financial crisis we are now seeing every year since the 1980s. Specifically, I’m thinking of Michael Lewis and Nassim Nicholas Taleb – both of whom were in the finance industry in the 1980s and got out while the going was good – and then went on to write about it’s unsustainability. They were right that the Wall Street boom was unsustainable and built on shakey foundations. But they obviously missed something in what was going on as the boom continued for many years. In other words, they were right in the end, but wrong for quite some time. Their insight allowed them to see moral problems that would come back to haunt us but had little practical effect in terms of predicting the future – including this crisis.

All this is less true of Roubini though who famously did predict with some precision what has happened – and did so in a timely fashion. As the New York Times described his 2006 presentation to the IMF:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

What Michael Lewis and Nassim Nicholas Taleb did was correctly point to an unsustainability in our system – but their insights haven’t had the same predictive value as Roubini’s.