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]
Roy-
As you have some skin in the outcome I believe your opinion carries more weight than the usual lip flapping posting here. The sky is falling, or all is wonderful is easy to say.
I’m on the other-side of the continuum. I believe we have reached the bottom of the recession or darn near and we globally are on the upswing. I recently bought about $8,000 of EXM as a play on the stock market and economy improving over the next 2-5 years.
Time will tell if you or I are correct.
Dude...I already have all that “stuff”. Well except my zombie book is a vampire killing book.
Amateur.
Well yeah.... but do you know how much silver bullets cost? And I can use ‘em on werewolves too.
There’s a pretty intensive website on “silver bullets”, believe it or not. What started out as a lark became quite the ordeal for this guy.
The short answer is, silver bullets are just about impossible to make interestingly enough. It melts at a much higher temperature than lead, and doesn’t lend itself to casting, as it absorbs oxygen. So special undersized molds have to be used. I think he ended up machining billet to get something that would work.
You and I have similar attitudes about this: We both have an opinion and believe current information backs it up, but we also both admit we could be wrong. “Time will tell” is my favorite line in this thing. I’ve been wrong before and I hope I am wrong on this.
The bottom line is, government is the root cause of the mess we're in. Something leftists refuse to consider. Instead, they just keep digging.
Yes - that would be a good of putting it.
The unintended consequences of giving away houses infected an unregulated market.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.