What is a Double Dip Recession

With U.S. housing sales last month declining 27 percent from a month ago and the American economy growing less than expected in the second quarter, fears over a double-dip recession are spreading. The term “double dip,” which was created in the U.S. in 2001, refers to an economy falling into recession again after showing brief signs of recovery. Two pillars of the conventional economic cycle are a V-shaped fast recovery after a downturn and a slower U-shaped recovery. Unlike these two patterns, a double dip shows a W-shaped recovery.New York University economist Nouriel Roubini, who foresaw the global financial crisis, predicts a 40 per cent probability of a double dip Recession.US growth would be well below 1 per cent in the third quarter as economic “tailwinds” in the first six months of the year became “headwinds” in the second half of the year, Nouriel Roubini told Bloomberg last week.

Trailer: Wall Street 2 : Money Never Sleeps

Watch the trailer for Oliver Stone's sequel, Wall Street 2: Money Never Sleeps, starring Michael Douglas and Shia Lebeouf. Courtesy of 20th Century Fox.

Nouriel Roubini has a small role in the Oliver Stone sequel, Wall Street 2 Money Never Sleeps has become a hotbed for Hollywood’s A-list. The first film starred current TV actor Charlie Sheen as Gordon Gekko’s naive apprentice Bud Fox, and apparently he’s back for more, and surprisingly the long awaited casting of Jonah Hex aka Josh Brolin has also been confirmed! Nouriel Roubini Dr Doom NYU Professor And Chairman Of RGE Monitor professor of Economics, and is best reknown for predicting the current the collapse of the housing market and the current financial recession.

Roubini : U.S. Cannot Prevent Slower Economic Growth

Aug. 27 (Bloomberg) -- New York University professor Nouriel Roubini discusses expectations for U.S. economic growth in the third quarter. Roubini, talking with Tom Keene and Ken Prewitt on Bloomberg Radio's "Bloomberg Surveillance," also discusses the effectiveness of Federal Reserve monetary policy. (This report is an excerpt. Source: Bloomberg)

Growth Revised Down, Bernanke Mulls Options

 

AssociatedPress--August 27, 2010--The government says economic growth has been weaker than thought, the AP's Mark Hamrick reports that the Federal Reserve chief says he stands ready to help if needed.

Roubini : double dip risk is now 40%

Nouriel Roubini said earlier through his twitter feed that Q3 GDP growth very likely to be below 1%; and likely to be closer to 0% than to a pathetically lousy 1%. So double dip risk is now > 40%” and he confirmed it in an interview with CNBC yesterday CLICK HERE >>> to watch the interview :
“Based on the latest economic data, it looks like the third quarter is going to be well below 1 percent, and certainly closer to zero than to 1 percent, based on the current data,” Roubini told CNBC. “And that’s just the beginning of the second half of the year.” Roubini said several factors that acted as tailwinds boosting the economy in the first half of the year “are going to be essentially headwinds” in the second half.

Roubini : Rising Double Dip Risk

Aug. 26 2010 | Discussing whether the chances of a double-dip recession have reached perilous levels in the United States, with Nouriel Roubini, RGE chairman & founder.

Roubini warns about Turkey

New York University economist, Nouriel Roubini who foresaw the sub prime mortgage crises warned that the Turkey’s current account deficit was being financed through volatile inflows.

Nouriel Roubini praises Israeli economy

New York University economist, Nouriel Roubini who foresaw the sub prime mortgage crises has said that Israel's economy is one of the strongest in the world. He was speaking in a speech to investment advisers in an initiative led by investment house Excellence. He praised Israel's fiscal and monetary management. He said Israel was a good place for investors to know about and to interest clients in. He said Israel's economy is one of the strong stand most developed in the world. He predicted that other leading economies would shrink in the year ahead, the USA by 1.5% and advised investors to choose companies rather than nations for investment.

Nouriel Roubini on globalization

Nouriel Roubini : "I think globalization actually maintains and fosters various elements of national and cultural identities. I don’t think everything is being homogenized. If anything, your food, your culture, and your ethnicity might become part of the globalized world, and thus absorbed by other countries. -"

Nassim Taleb Interview with Planet Money 18 Aug 2010

Deep Read: Nassim Taleb (The Black Swan Guy)

Nassim Taleb : "Forecasts do not work , a cab driver can forecast better" "there is a black swan effect" "debt needs a more precise forecasting" "you do not cure a Ponzi scheme with another Ponzi scheme"
What’s worse, the period in which he has to suffer withdrawl pains, or giving him more cocaine, or heroin or whatever he’s addicted to? ...

The governments should know that what matters for us is cure the problem, not postpone it. We've postponed the problem for two years. ...

It's like Madoff. ... Had we propped up Madoff, nobody would have suffered ... You suffer on the day when Madoff collapses.

Nouriel Roubini : The Treasury plan is a disgrace

Nouriel Roubini :"The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. -"

Nouriel Roubini RADIOLIVE Interview

Amongst the topics discussed by Dr. Nouriel Roubini with the New Zealand based Radio Radiolive are : quantitative easing in the U.S., the U.S. dollar, corporate earnings, interest rates, financial reform, and he explained what could be done in order for the global economy to get itself out of the mess where it is in now.

Click Here to Listen to The Interview >>>>>>

Nouriel Roubini is Professor of Economics at New York University's Stern School of Business, is a professor of economics at the Stern School of Business, New York University and chairman of RGE Roubini Global Economics, an economic consultancy firm . Prof. Nouriel Roubini A world-class economist who offers an unflinching look at the global meltdown and distinctive insights into its course going forward. His research on financial crisis in emerging economics has yielded a unique and now vindicated approach to future collapses. Roubini speaks on the global economic outlook and its implications for the financial markets. From his analysis of past collapses of emerging economies, he has identified common factors that support his predictions of crisis in the US and world markets. He has held several high-level advisory positions in the US government and international finance organizations, published numerous policy papers and books on key international macro-economic issues and is regularly cited as an authority in... In his latest book "Crisis Economics" which was released this month (Aug), he explains what the global economy is going to have to do to get itself out of the mess that it's now in.

Nouriel Roubini on The subprime crisis

Nouriel Roubini : "Reckless people have deluded themselves that this was a subprime crisis. But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts… We have a subprime financial system, not a subprime mortgage market."

Nouriel Roubini : Korea should join the BRIC

Re-known world class Economist Nouriel Roubini in his recent book, 'Crisis Economics: A Crash Course in the Future of Finance.' Said that Korea is an innovative and dynamic country equipped with sophisticated technology and skilled labor . In his book Roubini named Korea as the most competitive country to become the next member of BRICs, The BRIC are the emerging markets of Brazil, Russia, India and China.

Nouriel Roubini : The to big to fail are too big to be saved

Nouriel Roubini speaking at Fora TV about the problem of the too big to fail said : "These institutions are too big to fail they have to be broken up , and I think that would be the right of thinking about the too big to fail problem ..the problem is that these institutions not only are too big to fail today but they are also too big to be saved or too big to be build up , and that's what's happening right now in Europe : You have financial systems that are on the brink, and because of the fiscal problems of the government, a government like Greece cannot even backstop it's own financial system because it doesn't have the fiscal resources...So the private debt crisis becomes a public debt crisis.so the too big to fail and the too big to be build up"

Nouriel Roubini : Gordon Gekko Reborn

Gordon Gekko "Greed is Good"

Nouriel Roubini wrote in an article on project syndicate 2010-08-13 : " In the 1987 film Wall Street, the character Gordon Gekko famously declared, “Greed is good.” His creed became the ethos of a decade of corporate and financial-sector excesses that ended in the late 1980’s collapse of the junk-bond market and the Savings & Loan crisis. Gekko himself was packed off to prison.

A generation later, the sequel to Wall Street – to be released next month – sees Gekko released from jail and returned to the financial world. His reappearance comes just as the credit bubble fueled by the sub-prime mortgage boom is about to burst, triggering the worst financial and economic crisis since the Great Depression."
full article >>>

"The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much"...
Nouriel Roubini is Chairman of Roubini Global Economics, Professor of Economics at the Stern School of Business, New York University, and co-author of the book Crisis Economics.

Nassim Taleb : The Government Bonds will Collapse, Avoid Stocks

Nassim Taleb Says The Financial System Is Now Riskier Than It Was Before The 2008 Crisis

“I’m very pessimistic,” he said at the . “By staying in cash or hedging against inflation, you won’t regret it in two years.”

Treasuries have rallied amid speculation the global economic recovery is faltering, driving yields on two-year notes to a record low of 0.4892 percent today. The Federal Reserve yesterday reversed plans to exit from monetary stimulus and decided to keep its bond holdings level to support an economic recovery it described as weaker than anticipated. The Standard & Poor’s 500 Index retreated 16 percent between April 23 and July 2, the biggest slump during the bull market.

The financial system is riskier that it was than before the 2008 crisis that led the U.S. economy to the worst contraction since the Great Depression, Nassim Taleb told Bloomberg on Aug 11 2010

via bloomberg.com

Nouriel Roubini on The luxury Real Estate Market

Nouriel Roubini : "It’s not as if there’s infinite wealth. There are thousands of new luxury units coming on the market, and the question is, who will buy them? If people start losing jobs, who can afford to pay 2, 3, 4, 5 million dollars? Do you know 10,000 new investment bankers on Wall Street?"

Quoted in S. Jhoanna Robledo, “The Descent,” New York Magazine (2006-09-24 )

Nouriel Roubini Quotes

Here are some of Nouriel Roubini's quotes :

“Anything that makes your attempt to buy an asset more risky can have a material effect on the amount of investment we get. These days, we'd be lucky if we get lots of foreign direct investment. We should not restrict it. We should make it easier.”

"I am not going to say I told you so, but I did."

“There is definitely a big split in Europe at the moment. Europe is getting leaner and meaner, but that causes nervousness at the household level.”

“Global imbalances are growing, cross-border financing needs are increasing and a smooth-functioning financial system is now essential for this.”

"This consensus optimism is, I believe, not supported by the facts.At some point Investors will realize that bank losses are massive , and that some banks are insolvent . Deleveraging by highly leveraged firms - such as hedge funds - will lead them to sell illiquid assets in illiquid markets . and some emerging market economies - despite massive IMF support - will 3experience a severe financial crisis with contagious effects on other economies . So while this latest bear - market rally may continue for a bit longer , renewed downward pressure on stocks and other risky assets is inevitable " 

"The likely scenario for advanced economies is a mediocre U-shaped recovery, even if we avoid a W-shaped double dip. In the US, annual growth was already below trend in the first half of 2010 (2.7% in the first quarter and estimated at a mediocre 2.2% in April-June). Growth is set to slow further, to 1.5% in the second half of this year and into 2011.

Whatever letter of the alphabet US economic performance ultimately resembles, what is coming will feel like a recession."

"The challenge we face is how to integrate the Muslim world into the global economy. Asia has become part of it, but not Africa or the Middle East.One could realistically think about a Marshall Plan with respect to this part of the world, to succeed in integrating the Muslim and Arab world into the global economy as we did in Europe after World War II. For example, we’ve wasted hundreds of billions of dollars on the Iraq war. Had we taken a third of this money and invested it into a Marshall Plan for the Middle East, the benefits would have been ten times more than wasting it on a war."

The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown.

Roubini : 1.5% GDP growth is going to feel like a Recession

Nouriel Roubini : in my view what has been passed by the congress recently in the US is too little too late , it's going in the right direction but it is not do enough to prevent the next financial crisis , I think that the limits of it are too big to fail problem has not been resolved it's gonna have an insolvency regime , it is gonna shut them down , it is not gonna work in my view if that too big to fail are just too big , I think the whole issue of compensation of bankers and traders a key , because the regulation can do this much in order to make sure to incentive people do not lead them to take too many risk in leverage that reform of essential compensation has now been done the problems of Fannie and Freddie has been postponed , the whole issue of derivative has been diluted ....etc...
"1.5% growth is not a double-dip recession, but it's damn close to it because potential GDP growth is closer to 3%"

Nouriel Roubini on fiscal austerity

Nouriel Roubini “What is the purpose of going through draconian fiscal austerity, another three years of recession on top of the previous two and ending up with an unsustainable public debt-to-GDP ratio that, at best, would still be close to 150% of GDP?”

V is dead; anemic U growth is baseline

"V is dead; anemic U growth is baseline; prob of a double dip W is now 40%; and a L shaped near depression is possible in US/Eurozone/Japan" Nouriel Roubini via twitter

Nouriel Roubini Interview with The Economist Magazine

Tea with Nouriel Roubini, professor of economics.

August 11, 2010 The professor of economics on America's banking reforms, the risk of deflation in advanced economies and China's growth



In this interview with The economist , Nouriel Roubini, Professor of Economics at New York University, discusses his views on America's banking reforms, systemic risks, regulatory reform, the risk of deflation in advanced economies , and prospects of China's growth . Mr. Roubini is well known for his predictions in 2005 and 2006 regarding the imminent bursting of the housing bubble and the deep recession that ultimately followed

Nouriel Roubini on Systemic Risks and Possibility of Double Dip Recession

In a recent interview with economist , Nouriel Roubini, Professor of Economics at New York University, discusses his views on America's banking reforms, systemic risks, regulatory reform, the risk of deflation in advanced economies , and prospects of China's growth . Mr. Roubini is well known for his predictions in 2005 and 2006 regarding the imminent bursting of the housing bubble and the deep recession that ultimately followed

Nouriel Roubini : We are still in the middle of this crisis

Nouriel Roubini: “We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don’t address the issues, you risk having a double-dip recession and one which is at least as severe as the first one.”

Nouriel Roubini and Ian Bremmer exclusive Amazon Interview

full Interview http://www.amazon.com/Crisis-Economics-Course-Future-Finance/dp/1594202508?tag=lipmon-20

Ian Bremmer and Nouriel Roubini: Author One-to-One

Bremmer : Who is to blame the most for the recent financial crisis? Who were the culprits of the latest one?

Roubini : The list of culprits is very long. The Fed kept interest rates too low for too long in the earlier part the past decade and fed — pun intended — the housing and credit bubble. Bankers and investors on Wall Street and in financial institutions were greedy, arrogant and reckless in their risk taking and build-up of leverage because they were compensated based on short term profits. As a result, they generated toxic loans – subprime mortgages and other mortgages and loans – that borrowers could not afford and then packaged these mortgages and loans into toxic securities – the entire alphabet soup of structured finance products, so-called “SIVs” like MBSs – Mortgage-Backed Securities, or CDOs – Collateralized Debt Obligations -- and even CDOs of CDOs. These were new, complex, exotic, non-transparent, non-traded, marked-to-model rather than market-to-market and mis-rated by the rating agencies. Indeed, the rating agencies were also culprits as they had massive conflicts of interest: they made most of their profits from mis-rating these new instruments and being paid handsomely by the issuers. Also, the regulators and supervisors were asleep at the wheel as the ideology in Washington for the last decade was one of laissez faire “Wild West” capitalism with little prudential regulation and supervision of banks and other financial institutions.

Niall Ferguson - The Ascent of Money - Q&A Session

Q&A from the followin event:

Harvard professor Niall Ferguson sets out to explain how Planet Finance came to dominate Planet Earth.

Nassim Taleb, THE BLACK SWAN, The Fragility Crisis has Just Begun,

Nassim Taleb, a professor at New York University and author of "The Black Swan: The Impact of the Highly Improbable,"

Nassim Taleb : Convexity, Robustness, and Model Error inside the Fourth Quadrant,

Link to the Full story
Excerpts from Nassim Taleb's lecture OxfordBTLecture
The central idea in The Black Swan is about the limits in the knowledge about of small probabilities, both empirically (interpolation) and mathematically (extrapolation)2, and its consequence. This discussion starts from the basis of the isolation of the "Black Swan domain", called the "Fourth Quadrant"3, a domain in
which 1) there is dependence on small probability events, and 2) the incidence of these events is incomputable. The Fourth Quadrant paper cursorily mentioned that there were two types of exposures, convex and concave and that we need to "robustify"4 though convexification. This discusses revolves around convexity biases as explaining the one-way failure of quantitative methods in social science (one-way in the sense that quantitative models in social science are worst than random: their errors go in one direction as they tends to fragilize).

Nassim Taleb: The Regulator Franchise, or the Alan Blinder Problem

Tuesday, August 3, 2010

Link To Full Story: www.huffingtonpost.com

Tell me if you understand the problem in its full simplicity: former regulators and public officials who were employed by the citizens to represent their best interests can use the expertise and contacts acquired on the job to benefit from glitches in the system upon joining private employment -- law firms, etc.

Think about it a bit further: the more complex the regulation, the more bureaucratic the network, the more a regulator who knows the loops and glitches would benefit from it later, as his regulator edge would be a convex function of his differential knowledge. This is a franchise. (Note that this franchise is not limited to finance; the car company Toyota hired former U.S. regulators and used their "expertise" to handle investigations of its car defects).
I have several remarks.

First, the more complicated the regulation, the more prone to arbitrages by insiders. So 2,300 pages of regulation will be a gold mine for former regulators. The incentive of a regulator is to have complex regulation.

WHY DID THIS CRISIS HAPPEN?

WHY DID THIS CRISIS HAPPEN?
by Nassim Taleb :
Summary of Causes: The interplay of the following five forces, all linked to the misperception and hiding of consequential tail events (Black Swans).

1) Increase in hidden tail risks across all aspects of economic life, not just banking; while tail risks are not possible to price, neither mathematically nor empirically. The same nonlinearity came from the increase in debt, operational leverage, and the use of complex derivatives.

2) Asymmetric and flawed incentives that favor risk hiding in the tails, two flaws in the compensation methods, based on cosmetic earnings not truly risk-adjusted ones a) asymmetric payoff: upside, never downside (free option); b) flawed
frequency: annual compensation for risks that blow-up every few years, with absence of claw-back provisions.
Read Full Article >>>

The price of oil is creating a positive impetus for the peso

“The price of oil is creating a positive impetus for the peso,” said Bertrand Delgado, a senior economist at Roubini Global Economics LLC in New York. “The market knows the central bank will intervene when the peso appreciates too quickly.”
In www.businessweek.com

Roubini : The slowdown will feel like a recession

the global slowdown will worsen in the second half of this year as stimulus measures wane and austerity programs take hold.
The slowdown “will feel like a recession.”
The outlook for the euro zone “is worse” than the US and growth may be close to zero by the end of the year, Nouriel Roubini wrote last week in the Australian Financial Review newspaper,

Nouriel Roubini warns of more declines

On July 4, two days after the benchmark fell to 1,022.58, New York University economist Nouriel Roubini warned of more declines.
“The next few weeks and months will be a time of volatility as the market surprises on the downside,” he said July 4 in an interview at a meeting of France’s Circle of Economists in Aix en Provence, France. Roubini, who recommended selling stock before the S&P 500 slid as much as 57 percent from its record in October 2007, forecasts the global economy will slow in the second half as Europe puts in place measures to reduce debt, slowing demand. Roubini, the chairman and founder of Roubini Global Economics,
via Bloomberg.com

Nassim Taleb: The Next Black Swan Is The Gigantic Ponzi Scheme Of Government Debt

Nassim Taleb : The massive one is government deficits. As an analogy: You often have planes landing two hours late. In some cases, when you have volcanos, you can land two or three weeks late. How often have you landed two hours early? Never. It's the same with deficits. The errors tend to go one way rather than the other. When I wrote The Black Swan, I realized there was a huge bias in the way people estimate deficits and make forecasts. Typically things costs more, which is chronic. Governments that try to shoot for a surplus hardly ever reach it.

The problem is getting runaway. It's becoming a pure Ponzi scheme. It's very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.
via businessweek.com

Economic Warnings From Niall Ferguson and Nassim Taleb

Two widely respected economic commentators, Harvard's Niall Ferguson and Nassim "black swan" Taleb, have offered highly pessimistic assessments of what lies ahead for the American economy. Information like this is widely ignored by investors in weeks... FULL ARTICLE AT THE MARKET ORACLE

Taleb: Government Deficits Could Be the Next Black Swan

Nassim Taleb : "The problem is that citizens are being led to invest in securities they don't understand by people who themselves don't quite understand the risks involved. The stock market is probably the best thing in the world, but the true risks of the stock market are vastly greater than the representations. And this leads to extremely strange situations in which, say, someone has a bakery, is extremely paranoid about suppliers, very careful about risks, and protects his business with appropriate insurance. Then, at some point, he puts his $122,000 in savings in a fund that he knows nothing about, based on risk measures he knows nothing about, in companies very few people know much about.

People use "risk measures," but you're really not measuring anything like you measure temperature or distance. You are making a speculative assessment of a future event. That's not measuring, that's estimating. And as we saw with BP (BP), with the banking system, and with Toyota (TM), companies themselves are hiding risks from the security analysts. They're cutting corners. Companies have a tendency to hide risks.

So someone extremely careful and prudent in the management of his own affairs will be completely careless with the half of his savings invested in the stock market. I'm saying: Don't use the stock market as a repository of value. It has vastly more risks than you think."
via businesweek.com




Nassim Taleb discusses principles that will help achieve a more robust financial system free of negative black swans. Giving an addict more drugs will not cure the addict, just as increasing the debt of an over-leveraged system will only prolong an even more severe economic meltdown. Unfortunately, the Administration is not listening to him.