Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

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.


© 2005-2018 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

6 Critical Money Making Rules