Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

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

6 Critical Money Making Rules