Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
BREWING FINANCIAL CRISIS 2.0 Suggests RECESSION 2022 - 28th Jan 22
Financial Stocks Sector ETF XLF $37.50 Continues To Present Opportunities - 28th Jan 22
Stock Market Rushing Headlong - 28th Jan 22
The right way to play Climate Change Investing (not green energy stocks) - 28th Jan 22
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Economy Hits Another Roubini Road-Hump: Is This The End?

Interest-Rates / US Economy Mar 29, 2012 - 08:14 AM GMT

By: Andrew_Butter

Interest-Rates

Best Financial Markets Analysis ArticleNouriel Roubini made his name out of a paper he co-authored in 2003 with someone whose name I forget, and everyone else did too. His thesis then was that the U.S. Current Account deficit (basically a long word for the trade deficit in Goods and Services) was unsustainable, so there would be a meltdown.

He was actually wrong for the right reasons; his idea was that the demand for U.S. Treasuries by foreigners was not enough to finance the Trade/Current Account Deficit, that part was right.


Where he went wrong was that he hadn’t anticipated how much toxic assets Goldilocks & Co would be able to sell to stupid Norwegian pension funds and megalomaniac idiots running RBS, etc, that’s annotated “A” on the chart.

So in 2003 he announced the world was going to end, and in 2004 he said the same thing, and in 2005, and in 2006; that’s where he got the name Dr. Doom.

And then, Phew!! In 2007 and 2008 the world, as they knew it then, did end, that’s annotated “B” on the chart, the area highlighted in yellow is the amount by which the Trade/Current Account Deficit could not be financed by mortgaging America to what the U.S. Immigration authorities calls “Aliens”.

Two big reasons for that, first the Norwegian pension funds and the idiots in RBS realized that a AAA synthetic collateralized debt obligation, lovingly crafted by Goldilocks & Co wasn’t worth more than a piece of used toilet paper, so the stopped buying.

Second, in spite of spending a couple of trillion dollars (or perhaps more, it depends on how you do the accounting), on invading an oil rich country, the Achilles Heel of the American Dream (cheap gasoline), was exposed by a spike in oil prices. And yes you guessed, they couldn’t borrow enough to finance their dreams.

But anyway, disaster was averted, Phew-Two!! Because somehow, I never really figured out how, they managed to start shifting U.S. Treasuries to the aliens, that’s annotated “C” on the chart, and in Q-III 2010 they even managed to shift some (highly discounted) toxic waste.

Another factor there was that oil un-spiked.

Then, all good things come to an end, first the aliens started to have problems of their own, and second there was another oil-spike, and that brings us to “D”.

Notice that the sales of U.S. Treasuries to government aliens, has more or less dried up, and the only thing that’s keeping the show on the road at the moment is sales to non-government aliens.

Either, (a) oil prices will collapse, and America will scrape past their second Roubini Road-Hump (b) they will figure out something else to mortgage to pay next month’s gas bill (I can’t imagine what), or (c) Roubini will have his moment of fame, and what nearly happened in 2008/9, will actually happen.

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe. Ex-Toxic-Asset assembly-line worker; lives in Dubai.

© 2012 Copyright Andrew Butter- 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.

Andrew Butter Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

ernie messerschmidt
29 Mar 12, 12:53
collapse a good thing

"the only thing that’s keeping the show on the road at the moment is sales to non-government aliens" Question: is this really the Fed buying from off-shore accounts and the banks buying with free Fed money?

As for what will happen under option c, I'm sure it's not just one scenario, but a range of possibilities. Almost anything will be better than the present worst of all possible worlds of socialism (state support)for the banks and debt-slavery for everybody else. Collapse of the present rotten world financial system will be a good thing. Where's the model for something better? In the BRIC countries that survived 2008 well because their predominantly public banks didn't do derivatives to speak of and acted counter-cyclically and in the public interest.


Post Comment

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