Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Netherlands, Germany Have Euro Disaster Plan - Possible Return to Guilder and Mark - 28th Nov 14
Russia’s Gold Monetary Solution - 28th Nov 14
British Government Publishes UK, Scotland DevoMax Smith Report Suicide Note - 28th Nov 14
The Price Of Oil Exposes The True State Of The Economy - 27th Nov 14
Brazilian Bovespa Stock Market Technical Analysis - 27th Nov 14
Gold Price Would Soar on Possible Swiss Yes Vote - 27th Nov 14
Crude Oil Asset Bubble Trouble - 27th Nov 14
Thanksgiving and Puritan Geopolitics in the Americas - 27th Nov 14
The Dow Jones Stocks Index - Beautiful Tree in the Desert - 27th Nov 14
The Digital World, The Opiate of The People - 27th Nov 14
Harry Dent's Simple Strategy for Surviving Withdrawals from Markets on Crack - 27th Nov 14
Socialist France Just Cannot Compete Against Google Freedom - 27th Nov 14
A Short Tale About the Grand Manipulation of Crude Oil Prices - 26th Nov 14
China Secret Gold Buying ... How Could It Happen? - 26th Nov 14
Gold Price Spikes to $1,467.50/oz on Computer Glitch? - 26th Nov 14
Gold - So Bad It's Good: Surviving 2014 - 26th Nov 14
TrueShopping.co.uk Real Customer Experience Review - Online Shopping Lessons - 26th Nov 14
Is There A New Global Consensus About Cheating Investors To Reboot Employment? - 26th Nov 14
EUR/USD – Currency Bulls Don’t Give Up - 26th Nov 14
Swiss Gold Referendum A Golden Opportunity for Switzerland - 25th Nov 14
Silver: What COT Analysis Tells Us - 25th Nov 14
Stock Market Big, Bold and Ugly - 25th Nov 14
U.S. Dollar Near Top? Gold and Silver Trading, Platinum Breakout Invalidation - 25th Nov 14
Buy Fear - Easily Pick Up Profits on Stock Market Dips - 25th Nov 14
The Islamic State Reshapes the Middle East - 25th Nov 14
Gold Price Forecast 2015 - 25th Nov 14
The Swiss Referendum On Gold: What’s Missing From The Debate - 25th Nov 14
Clash of Generations - Why Millennials Still Live at Home; Not Jobs, Student Debt, or Housing - 25th Nov 14
Stock Market Reminiscent of Pompeii - 25th Nov 14
Once Upon A Time There Were Philosopher Kings - 24th Nov 14
The 2014 Crude Oil Price Crash Explained - 24th Nov 14
China Stock Investing - Follow the Money! - 24th Nov 14
122 Tonnes of Gold Secretly Repatriated to Netherlands - 24th Nov 14
What Causes the U.S. Dollar to Move? - 24th Nov 14
Stock Market Indexes New Highs - Will Uptrend Extend Even Further? - 24th Nov 14
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

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