Roubini: Carl Marx was right, capitalism will destroy itself
Monday, 15 August 2011

In an interview with The Wall Street Journal, economist Nouriel Roubini paraphrased another well-known economist Carl Marx to best explain what he thought of today's roiled global economy.

Roubini, who is best known for his dire outlook on economic developments which has earned him the nickname 'Dr. Doom', warned that economy may be heading into a global recession.   “Karl Marx was right, at some point capitalism will destroy itself,” Roubini said in an interview with Wall Street Journal.

Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and would place pressure on the economic system.

Developed economies were implementing austerity programs in order to try to fix their debt-damaged economies when they should be enacting more monetary stimulus. Because of that, he predicted the world had a 50 per cent chance of falling into a recession, and that the next 2-3 months would reveal which way the global economy would head.

"We are at stall speed right now, and we do not know if we are going to go up, or down," he said. The world is also operating right now, "in the fog of uncertainty," he said.

Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies. Now, consumers, apart from having less money to spend are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.


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