In a variation of the environmental meme, "Think globally; act locally," Nouriel Roubini said on Wednesday that "problems are global, but policies are national" and that "coordinating among different countries is going to become increasingly difficult."
Roubini and Eurasia Group's Ian Bremmer appeared on "Bloomberg Surveillance" from the World Economic Forum in Davos, Switzerland. Roubini added "political tensions, economic and financial tensions, like currency wars, can lead eventually to protectionism."
On the definition of a G-1 and G-0 world:
Roubini (left): It was never G-7. We pretend it's G-10. It was always G-1. The leader, Germany, was to provide the global public goods, security, and free trade. Now this power is declining in terms of relative terms of the United States. We have rising powers like China, Brazil, India and so on. We live in a balance of power. The balance of power with conflicts of interest with goals being very different, you cannot reach agreement on fundamental economic and geopolitical issues. It is a more fragile economy because interdependence implies that problems are global, but policies are national. Coordinating among different countries will be increasingly difficult. It leads to political, economic and financial tensions like currency wars that can lead eventually into protectionism.
Roubini: I say they are less worse than last summer in eurozone. Tail risk has been reduced…The fundamental problem is, look at look at the unemployment numbers in Spain today, rising even further. They are really shocking numbers. The fundamental problems in the eurozone is the lack of growth, continued recession, of debt sustainability, lack of competitiveness, remain.
On the political risk in the United States:
Bremmer (right): The political risk in the U.S. is that unlike the fiscal cliff that we weren't going to go over by virtue of removing the debt limit and kicking that down the road, you have actually made it more likely you have a real smaller crisis on sequester.
On the American attitude to what is going on in the world right now:
Bremmer: We want to do less.
Roubini: We have less fiscal resources. We cannot do more.
Bremmer: We want to show the flag to ourselves, and nation building at home, develop more patriotism about doing things in the U.S. like getting jobs back, making unemployment lower, getting jobs back, making America feel good about itself again. That's an important message…We're sitting at the World Economic Forum. It is not global. It is global as the World Series and the World Bank and we need to understand the fact that values are becoming more localized.
