Some economists get the reputation of always being negative (or positive). I myself have been struggling with that imagine, but have been trying to get rid of it – If you are constantly bearish on the world you will often be wrong. However, ultra-bearishness can be a good “media strategy”. Somebody who is known as an über-bear Nouriel Roubini aka Dr. Doom.
Given Nouriel’s repurtation as a ultra-bear there is a tendency among market participants, commentators and even policy makers to pay particular attention to Nouriel’s views when things turn bad.
Just take a look at this graph of Google searches for ‘Nouriel Roubini’.
It is very clear that during the on-set of the crisis in 2008 Google searches for Nouriel’s name spiked. Since then Googles search for ‘Nouriel Roubini’ has been declining, but we have seen a couple of smaller spikes – particularly during the escalation of the euro crisis in 2011-12.
Hence, there is an indication that Roubini-seaches is a fairly good realtime indicator of market distress and general economic worries. Using this indicator should make us optimistic about the world.
Did the Evans rule kill Nouriel Roubini?
Over the past year we have seen quite a bit of turmoil in global Emerging Markets and lately also a significant increase in geopolitical tensions. Under normal circumstances we should think that this would cause a sharp rise in risk aversion. However, that has not happened and the Roubini-search indicator is a good illustration of that.
In fact it looks like the Federal Reserve’s de facto announcement of the Evans rule in September 2012 has had a significant lowered market volatility and risk aversion in general – visible in the continued and persistent decline in the number of Google searches for ‘Nouriel Roubini’ since September 2012.
In my view the Fed has effectively succeed in bringing back a monetary policy regime with what Bob Hetzel has termed ‘Lean-Against-the-Wind with credibility’. Despite all it’s (many!) faults the Fed has likely succeed in ending the Great Recession and we are effectively moving back to a pre-crisis style of world – New Great Moderation. That is great news for the global economy and for investors, but it is bad news for Nouriel Roubini (at least if he wants to maximise Googel searches for his name).
PS I believe that same actually goes for the Market Monetarists – we are just more interesting when things are bad than when things are great. THe interest in monetary policy simply fade dramatically when the Fed gets it more or less right and ensures a high level of nominal stability.