2 Reasons Why Gold Is Falling | NOURIEL ROUBINI BLOG

Tuesday, March 5, 2013

2 Reasons Why Gold Is Falling

"Gold is falling for two reasons. First of all, we have reduced the tail risk of a collapse of the Eurozone, of another global financial meltdown, of a war in the Middle East. And one of the situations where gold does best is when there is huge tail risk. When money is not safe in the banks and you want to drop everything and buy gold. The other extreme situation in which gold does very well is when there is a massive risk of inflation. But in spite of all these QE`s, of course base money has doubled, tripled, soon quadrupled, that`s not creating inflation for 2 reasons. One velocity has collapsed, most of this money hoarded by the banks in the form of excess reserves and there is no credit creation or very little. Secondly there is a huge slack in the labor market, wages are growing less than productivity and labor costs are falling. There is excess capacity, firms don`t have a lot of pricing power. So, the combination of slack in the goods and labor market means that inflation is the least of the concerns for the Fed, for the ECB, for the BOJ, for the BOE and so on. And therefore there`s no reason of inflation for going to gold. That`s why gold is going down." - in Yahoo Finance

Nouriel Roubini, (born March 29, 1958, Istanbul, Turkey), Turkish-born American economist and educator who was best known for predicting the 2007–08 subprime mortgage crisis in the United States and the subsequent global financial crisis.

Born to Iranian Jewish parents, Roubini moved with his family to Iran and Israel before they settled in Italy in 1962. After a year at Hebrew University of Jerusalem, he studied economics at Bocconi University in Milan (B.A., 1982) and Harvard University (Ph.D., 1988), where he specialized in macroeconomics and international economics. He joined the economics faculty at Yale University in 1988 and taught there until 1995, when he moved to New York University. He also served as a visiting scholar to the International Monetary Fund (IMF), was a research associate with the National Bureau of Economic Research (NBER), held single-year terms on the White House Council of Economic Advisers (1998–99) and at the U.S. Department of the Treasury (1999–2000), and cofounded (2004) the consulting firm Roubini Global Economics. Roubini spent much of his early career studying countries that experienced extreme economic failures, such as Mexico (in 1994), Thailand and other countries associated with the 1997 Asian financial crisis, Russia (1998), and Argentina (2000). He determined that each shared one common element: a massive current account deficit.(www.britannica.com)

Nouriel Roubini is the Chairman and CEO of Roubini Macro Associates, LLC, his own global macroeconomic consultancy firm. He is also a professor of economics at New York University’s Stern School of Business. Dr. Roubini has extensive policy experience as well as broad academic credentials. From 1998 to 2000, he served as the senior economist for international affairs on the White House Council of Economic Advisors and then the senior advisor to the undersecretary for international affairs at the U.S. Treasury Department, helping to resolve the Asian and global financial crises, among other issues. The International Monetary Fund, the World Bank and numerous other prominent public and private institutions have drawn upon his consulting expertise.