Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14
MH17 Crash Next Phase Economic Warfare - 22nd July 14
The TRUTH about China’s Massive Gold Hoard - 22nd July 14
Forex Multi-week Consolidation in EUR/USD Ended - 22nd July 14
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14
The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - 20th July 14
AUD NZD Taking The Forex Bull By The Horns - 20th July 14
US-backed Israeli Invasion of Gaza Unleashes Death and Destruction - 20th July 14
The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - 20th July 14
Stock Market in DANGER of Strangling the Bears to Death - 20th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Nouriel Roubini on U.S. Economy, Bond Vigilantes, and Yuen Becoming a Reserve Currency

Stock-Markets / Financial Markets 2011 May 03, 2011 - 04:37 AM GMT

By: Bloomberg

Stock-Markets

Best Financial Markets Analysis ArticleToday on Bloomberg Television, NYU professor and economist Nouriel Roubini talked about the euro and China's currency during a panel with Bloomberg TV's Tom Keene at the Milken Institute Global Conference in Los Angeles.


On the U.S. political economic projection:

"We have to address own problems. If you're looking at advanced economies, there's a series of problems that are going to remain with us, leaving aside geopolitical challenges we're facing. We're coming out of the balance sheets of a recession. We have excesses of debt and leverage in the housing sector, in the financial system and in the government sector, both state and local and federal level…That's a problem in the U.S., in the Eurozone, in Japan, in the most advanced economies. There is a problem of sovereign risk. The bond market vigilantes have already woken up in the periphery of the Eurozone. They have not woken up yet in the U.S., or U.K and Japan."

"[The bond vigilantes have not woken up] for a number of reasons… In the U.S., U.K. and Japan, we can, if we want to, monetize our fiscal deficit and we have done so to some level. In the case of Greece, you either raise taxes or cut spending…To monetize it is not an option because the ECB is institutionally having a single band-aid price and the ECB is more hawkish than the Fed. If Greece cannot resolve its debt problem through traditional taxes, then it will have to do an orderly debt restructuring and that will be, in my view, at this point unavoidable."

On the euro number where instability really comes into play:

"I would say that Germany, being uber-competitive, can live with the euro at $1.50 but the euro at $1.40 was already painful for the periphery of the Eurozone, where you have a bad period of wages growing more than productivity, labor costs rising…The euro should be much weaker than it is right now, to try to restore some growth in the peripheral Eurozone."

On whether the euro problems are due to the U.S. or the ECB:

"It is a combination. On the one side, the ECB is going to keep on tightening because they care about core inflation and not about growth, because the core is doing well while the Fed is going to stay on hold.”

"Financials are going to push the euro higher, but once it reaches the threshold of pain, it will cause more damage on the periphery and growth is going to disappear, it's not much there, the sovereign problem will be exacerbated, banking problems, competitiveness, so the euro, like in the spring of last year, we can go to $1.50, but once the periphery is damaged it can fall again."

"On the other side, there's also a fundamental weakness of the dollar because of the fiscal deficit and the Fed being on hold. But the way I described the FX market for last year, it's been like a beauty contest, not an issue of who is the prettiest or most handsome, but who's the least ugly.

"In the spring of last year, the dollar was less ugly because we had the euro crisis, the Greek crisis. Then by the summer, we had the risk of a double-dip recession, QE2 and then the euro became less ugly…So today the euro looks less ugly. It's really a beauty contest of who is the least ugly and that swings over time depending on growth concerns, sovereign debt, interest rate policies."

On which nation's currency will lead in this exchange rate game:

"Certainly not China. Because in this fundamental exchange rate game, the currencies that should be appreciating are those that are undervalued…while those that should be depreciating are the U.S., U.K. and other countries that have a bubble that went bust and now need net export growth given the domestic growth is going to be anemic…”

"The trouble is that China is resisting its currency from not depreciating. China is shadowing the U.S. dollar and then every other emerging market in the world, not just in Asia but those in Latin America, they say if China resists appreciating its currency, they don’t want to lose market share to China and they don't want a flood of cheap Chinese goods destroying their import competing sector."

On the economy in China:

"In China today, fixed investment is 50% of GDP and consumption is only 35% of GDP and has been falling...So the model of global China, net export net growth, more fixed investment, infrastructure, real estate, manufacturing, is not sustainable because no country can be so productive…Historically, every case of an over-investment has ended up in a hard landing. The Soviet Union. Latin America in the 70's, the U.S. in the 90's. There has never been a case of a return from an over-investment boom having a soft landing.

“I don't expect a hard landing to occur in China until after 2013 because next year, there'll be a change in political leadership. And that's going to be delicate. They're going to do everything to maintain growth."

On the Chinese renminbi:

"One year ago, I wrote an op-ed arguing over the next 20 years, the renminbi could become a major reserve currency…I said the next 20 years, but in the last year China has done so much to internationalize the role of renminbi as a unit of account, as a method of payment..So capital mobility is going to occur slowly, they're going to do it gradually, I think it's going to happen after 2012."

"But for example, now they are creating a renminbi-dominated market in Hong Kong to become significant in importance. They are doing it by pushing it offshore rather than inshore…But the Chinese have actually accelerated the pace at which they're making the renminbi a more international currency, much faster than I ever expected."

bloomberg.com

Copyright © 2011 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014