Posted on 10/23/2009 10:06:28 PM PDT by blam
Nouriel Roubini: Big Crash Coming
Written by Dave Nadig
October 23, 2009 00:00 AM
Dr. Nouriel Roubini, professor of economics and international business at the Stern School of Business at NYU and chairman of RGE Monitor, is perhaps best known for his prescient predictions of the financial market collapse in 2005.
Dr. Roubini will be the keynote speaker at IndexUniverse’s upcoming “Inside Commodities” conference on Nov. 4 at the New York Stock Exchange. We sat down with Dr. Roubini ahead of the conference to take his temperature on global markets, the role of oil (NYSEArca: USO) and gold (NYSEArca: GLD) and the impact of regulation.
Index Universe (IU.com): You’ve said that you’re worried we’re already sowing the seeds of the next crisis. Where do you see that most directly?
Dr. Nouriel Roubini (Roubini): Well in commodities, I look at oil prices. They fell from $145 last summer, came down to $30 earlier this year and now they’re back close to $80. But if I look at the fundamentals of demand and supply, demand is down to 2005 levels, supply and inventories are at all-time highs. In my view, the movement in oil prices is not fully justified by the fundamentals.
There are improving fundamentals. There is a global recovery. But that justifies oil going from $30 to maybe $50. I think the other $30 is all speculative demand feeding on it—speculators and herding behavior. Last year, when oil was at $145, that killed the global economy. I worry that oil is going to go up above $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 would have the same negative effects on the global economy as oil did at $145 last year.
Last year, when oil was at $145, the global economy was still growing. Right now it has collapsed, and is recovering. Oil pushing above $100 would have nasty, negative real trade effects and real disposable-income effects on all importing countries: U.S., Europe, Japan, China, India; all the countries that were hit by the oil shock last year. So that’s an element that is in my view totally speculative, and dangerous to the global economy.
IU.com: Is that true elsewhere?
Roubini: I could make a similar argument for other commodity prices. In my view, rising commodity prices are not justified by the fundamentals.
There’s a huge bubble, because we have zero rates in the U.S., zero rates around the world and a huge carry trade. Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dollar is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re creating a bigger bubble than before.
It’s going to go crashing down, in an ugly way. That’s the basics of the argument.
[snip]
Roubini destroys his credentials as an economist. There IS NO recovery. I work for a multi-national, and have contact with many regions. Trust me, there is NO global recovery.
Er ist voll mit schiess.
I am getting more convinced the “year of jubilee” was instituted whether we like it or not.
Whatever... look at a chart of oil prices for the past 5 years. And this guys claim to fame is that he predicted the fall of oil prices when they were at 145? A lot of people knew that was coming....
It seems pretty logical that in an economy that is 70% consumer driven, when so many people are out of work or struggling to pay off debts and accumulate savings, the economy won’t see improvement very soon.
Seems only global companies are doing okay.
The intent is to destroy the (mostly) White middle class. That's where all the angry 'Tea-Baggers' originate.
Transcript House Democrat Leaders and Economist Press Conference [”Horrendous” Long-term Outlook]
http://www.freerepublic.com/focus/f-news/2369056/posts
Former Federal Reserve Vice Chairman Alan Blinder
“despite the fact that we’re looking at an absolutely horrendous long-term fiscal outlook,”
Like most liberal garbage, he blames the financial crisis on lack of regulation.
So, then, please explain to us how the exemption of credit default swaps from regulation in 2000 worked out so well. As well as exemption of new commodities exchanges from regulation.
Also, please note, he said 'in part' - not in whole.
I agree that it’s clear the Dems. blocked investigation of the supply side of the problem. But the FBI warned Bush, the Justice dept. and Congress of the CDS fraud on wall street in 2004. And no one did anything. So the Dems & the Repubs are guilty of slopping in over-lapping troughs of special interest. The more we allow the Repubs to pretend to be real Constitutional Conservatives the longer we extend the problem. Of course they are closer to being Constitutional Conservatives but we can’t simply let the pendulum swing back to the right and be satisfied.
They are also depending upon a declining dollar. If the Fed cuts off the carry trade—probably unlikely—that would cause a rush to buy dollars and unwind the trade. What I think is more likely, another stock market crash sending investors into bonds. At the same time a last ditch swap effort with the central banks where they trade a few trillion in dollars for Euro’s, etc. Then they bid up the dollar and make it jump 5 percent overnight. This causes a panic and a massive unwinding of the carry. The only reason I believe this is possible is that everyone assumes the dollar is in a dealth spiral and its headed straight down. However, markets seldom every go straight down. The trend will assert itself over the long term, but during the short term there is plenty of manipulation and evil doing to be done. I’m curious and I would like to hear another opinion. Please let me know what you think.
Roubini was correctly calling the housing bubble back in 2004-5 when many who call themselves conservative were asserting a new normal under which housing prices could only go up.
This all fits with an economic prophecy I heard last year.....to beware, the so called recovery would crash worse than ever here. She said after receiving it that she checked with others and found out she was not alone in predicting this. I am sailing along, spending less and less as the Obama administration acts, I withdraw. Scary times.
I agree...that's been part of our problem.
happy days
I definitely agree with you there. However, they’ve got 1.7 billion people there. Less than 1 percent own gold. Additionally, they have been inflating their currency more than the US, dirty little secret. I believe what is being setup right now is the complete collapse and end of fiat currency as we know it. I highly recommend this article for an insight into what is going to happen.
http://dailyreckoning.com/fiat-currency/
Here is my “money where my mouth is” post number 47:
http://www.freerepublic.com/focus/news/2370442/posts?page=47#47
To be fair, this whole thing gelled for me in 2005 and the first documentation of my attitude can be found here:
http://www.freerepublic.com/focus/f-news/1704975/posts
Meanwhile, at another site, I was claiming this could be as bad as the GD. At the time it sounded (even to me) like crazy talk. Funny how perceptions change so fast. Here it is:
http://seattlebubble.com/forum/viewtopic.php?f=6&t=1936
It’s my post that refers to Freerepublic.
I would.
I have purchased water purifiers, food tablets, ammunition, and a book on how to most effectively kill zombies.
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