Roubini's rubicon: No DC deal could mean recession

Monday, 14 Oct 2013 | 12:46 PM ET
Roubini: Overweight developed markets
Monday, 14 Oct 2013 | 10:32 AM ET
You may want to be underweight in government bonds, says Nouriel Roubini, Roubini Global Economics co-founder and chairman, weighing in with his play on the global recovery.

A failure of Congress and the White House to strike a debt ceiling agreement could have profound consequences for the U.S. economy, economist Nouriel Roubini told CNBC on Monday.

Amid an ongoing debate about the impact of the U.S. even temporarily breaching its statutory borrowing limit, the economist known as "Doctor Doom" warned that breaching the $17 trillion debt limit could tip the economy into a new down curve.

Economist Nouriel Roubini
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Economist Nouriel Roubini

"If there is not agreement, the resulting financial damage could even tip us into a recession," especially because the economy is growing at a relatively paltry rate of 1.5 to 2 percent, the New York University economist said.

"The economic impact in terms of a fiscal drag is the difference" between U.S. economic growth and tipping into a downturn, Roubini said. He added that he was still optimistic in the medium term on the U.S., and predicted the Federal Reserve would eventually scale back its massive quantitative easing program "very gradually"—slowly pushing up interest rates.

—By CNBC's Javier E. David.

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