Monday, October 11, 2010

Nouriel Roubini : Rising Sovereign Debt Leads to Inflation, Defaults

“The bond vigilantes are walking out on Greece, Spain, Portugal, the U.K. and Iceland,”  “Unfortunately in the U.S., the bond-market vigilantes are not walking out.” Roubini said during a panel discussion on financial markets at the Milken Institute Global Conference in Beverly Hills, California.
“The thing I worry about is the buildup of sovereign debt,” said Nouriel Roubini, a former adviser to the U.S. Treasury and IMF consultant who in August 2006 predicted a “painful” U.S. recession that came to fruition in December 2007. If the problem isn’t addressed, he said, nations will either fail to meet obligations or see faster inflation as officials “monetize” their debts, or print money to tackle the shortfalls.

“While today markets are worried about Greece, Greece is just the tip of the iceberg, or the canary in the coal mine for a much broader range of fiscal problems,” Roubini, who teaches at NYU’s Stern School of Business, told attendees at the Beverly Hilton hotel. Increasing tax revenue won’t be enough to “save the day,” he added.

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