A third round of quantitative easing by the Federal Reserve is coming by year end, influential economist Nouriel Roubini told CNBC Thursday.
"The reality is we’re heading toward recession, and one of the few policy bullets [the Federal Reserve] has left is monetary policy or QE3," Roubini said.
Roubini, also known as "Dr. Doom," puts the chance of a double-dip recessionat 50 percent.
He said whether or not Federal Reserve head Ben Bernanke announces another round of quantitative easing Friday doesn't matter, it will be a reality later this year.
He noted that during the last Federal Open Market Committee meeting the Fed "discussed wide range of other options if the economy weakens" and further weak data could "be the trigger" for the Fed to take action at its next meeting Sept. 20.
While bad economic data on housing, jobs and home sales suggests a double-dip in the U.S., Ireland, Portugal, Italy and Spain "are already back in recession or never got out of the first one." Data also suggest France and Germany are in “borderline contraction” while the U.K. "has not had any economic growth for three quarters."
He agrees with President Obama that what the U.S. needs in the short term is further fiscal stimulus and medium-term austerity. However, when Obama speaks on Sept. 5 on his job program "he can make any speech he wants, I don’t see any chance of this Congress going to pass whatever he proposes" in an election year when "the worse the economy gets, the more likely Obama is going to lose the election and Republicans will be winning."
He's advising clients to take a "very defensive" approach toward equities and toward commodities.
"It's better to be safe rather than sorry and this year cash is going to be king," he said. "Therefore we would stay away from a wide range of risky assets. Cash gives you zero return but that’s better than losing 20 percent or 30 percent in the stock market. Treasury bonds are at 2 percent, but they could go toward 1 percent in a recession."