ROUBINI: It's not 2008 -- yet. But governments need to act fast...

Nouriel RoubiniHenry Blodget, Business InsiderProfessor Nouriel Roubini and the ‘TechnoGym’

We interviewed NYU economics professor Nouriel Roubini at the World Economic Forum in Davos, Switzerland.

Professor Roubini, who earned the nickname “Dr. Doom” during the global financial crisis of 2008-2009 is less pessimistic than one might expect given the recent turmoil in global stock markets and growing concerns about a US recession.

Roubini views the current stock drop as a “correction,” not a bear market.

But he cautions that, unless there is an appropriate and rapid policy response, the situation could get worse in a hurry.

We conducted our interview while accompanying Roubini through snow-covered streets on the way to a private dinner at the Belevedere Hotel. Along the way, we encountered a “pop-up” demo tent featuring an exercise machine called the TechnoGym.

Roubini owns a TechnoGym — and loves it. He credits it — and a daily workout regime — with his improved fitness and health. He interrupted his take on the global economy to demo the machine for us.

Here’s Roubini’s take on the economy and markets…

Henry Blodget: So, it’s not 2008 all over again?

Nouriel Roubini: No, I don’t expect it’s 2008 again. I don’t expect a global recession or financial crisis.

The current turmoil is driven by a bunch of factors, primarily concern that China might have a hard landing and collapse of its stock market and currency.

My view of China is that it’s going to have a bumpy landing, not a hard landing. Growth this year of 6% going to 5%. Those who say it’s 4% going to zero, I think they’re getting it wrong. They don’t realise that the service sector is rising and growing much faster than the manufacturing sector.

The US is slowing down, especially manufacturing. And the fall of oil prices is a negative, at least in the short run, because the US is a major producer of oil and energy. The fall in oil prices is negative for the markets because the market has a certain weight coming from oil and energy companies. But more importantly, it’s not just a supply shock that is driving oil prices but concerns about global demand. China. Emerging markets. And concerns about weakening demand are a negative sign for the global economy.

The Middle East is a mess. The proxy wars between Saudi Arabia and Iran are getting worse. And even in Europe, there’s terrorism and the migration crisis, the risk of Grexit, the risk of Brexit, austerity fatigue in the periphery, bailout fatigue in the core — there are plenty of issues that can go wrong in Europe. So, suddenly, the market is becoming nervous and there’s a correction.

Whether the correction becomes a true bear market depends on whether these shocks are more persistent or less persistent, first. And second on the policy response.

At this point, the PBOC (central bank of China) will have to ease more. The Chinese will have to do a round of fiscal stimulus. The Fed will have to signal more clearly they’re going to wait longer before they hike rates again. And the European Central Bank and the Bank of Japan will have to ease more.

If all central banks try to do more, you can maybe stop or reverse this particular correction. If you don’t have a strong policy response, this could become an outright economic slowdown.

We’ll publish more of our interview with Professor Roubini, including his take on the economic plans of the “Banana Republican” presidential candidates, soon…

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