Tags: Roubini | Menegatti | Risk | Threat

Roubini Economics’ Menegatti to Moneynews: Political Dysfunction Is Biggest Threat to US

Thursday, 11 Apr 2013 07:34 AM

By Glenn J. Kalinoski and David Nelson

Political risk is the main domestic issue facing the United States, according to Christian Menegatti, the managing director of research at Roubini Global Economics.

“The fact that Washington is not necessarily able to work together is a huge obstacle,” Menegatti told Newsmax TV in an exclusive interview.

“Nobody wanted the sequestration to happen, but there was no way to agree on how not to make it happen in some sense.”

Editor's Note: A full, unedited version of this interview is available exclusively to Financial Braintrust Alliance subscribers. Visit www.fbtalliance.com for more information and to sign up.

Menegatti added that political risk was the reason for the credit-rating downgrade of the United States by Standard & Poor's in August 2011 when the agency stripped the world's largest economy of its prized AAA status.

“It would be better to … build a path of fiscal adjustment over time and that’s going to be part of the legacy of [President Barack Obama] … and not just with short-term spending, but also with bigger issues like Social Security and healthcare,” he said.

“Sequestration is not the alternative way of taking care of this. Sequestration is going to have an important impact on growth.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

He also drew comparisons between consumers in the United States and corporate America.

“Corporates have actually quite strong balance sheets,” he said.

“They have hoarded a lot of cash throughout the last couple of years. The consumer … is struggling a little bit more. Interest rates … [are] very low and that is helping somehow the consumer cope with a labor market that is not very exciting and income growth is not very exciting. The consumer is still vulnerable, but I would say … we’re not past the stage of repair.”

Menegatti also expressed concern about the recent banking crisis in the island nation of Cyprus.

“The big mishandling in the Cyprus situation was to allow the authorities to go back home and try to pass through parliament a law that would impose a levy on insured deposits,” he said.

“That was never going to happen.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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