NYU’s Nouriel ‘Dr. Doom’ Roubini: Social Unrest Will Spread

All of the nations that have seen social unrest and demonstrations "are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world's middle classes are feeling the squeeze of falling incomes and opportunities," Roubini said.

Are Capitalists Weakening Capitalism?

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"So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong)," Roubini wrote on economomonitor.com. "Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand."

In other words, one of economist Karl Marx's critiques of capitalism is playing itself out in the global financial crisis.

Marx, among other postulates, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, and pay-down debt -- magnifying the effect of less money flowing back to companies.

No Easy Fixes to End Financial Crisis

Further, Roubini said there are no quick and simply or easy fixes to the current crisis. Officials have tried them all, and they have run out of rabbits to pull out of their hat.

Regarding fiscal policy, Roubini said that although there is a clear need for large fiscal stimulus short-term, national governments are in austerity mode -- which means fiscal policy will be a drag on economic growth.

Concerning another round of bank bailouts, Roubini said it "is politically unacceptable and economically unfeasible: most governments, especially in Europe, are so distressed that bailouts are unaffordable."