Eurozone's Fundamental Problems Remain Unresolved

"Beneath the surface calm of lower spreads and lower tail risks, the eurozone's fundamental problems remain unresolved. For starters, potential growth is still too low in most of the periphery, given ageing populations and low productivity growth, while actual growth – even once the periphery exits the recession, in 2014 – will remain below 1% for the next few years, implying that unemployment rates will remain very high.

Meanwhile, levels of private and public debt, domestic and foreign, are still too high, and continue to rise as a share of GDP, owing to slow or negative output growth. This means that the issue of medium-term sustainability remains unresolved.

At the same time, the loss of competitiveness has been only partly reversed, with most of the improvement in external balances being cyclical rather than structural. The severe recession in the periphery has caused imports there to collapse, but lower unit labour costs have boosted exports insufficiently. The euro is still too strong, severely limiting the improvement in competitiveness that is needed to boost net exports in the face of weak domestic demand." - in The Guardian

The Markets are underpricing the risk of a Slowdown in China

ET Now: How concerned are you about the slowdown in China?

Nouriel Roubini : In my view, the markets are underpricing the risk of a slowdown in China. We expect this year the growth in China would be 7.4%, whereas the consensus is above 8%. It is not going to be too hard a landing, 4-5% growth would have been a harder landing. Even if the latest economic data from China shows another round of monitoring fiscal and credit stimulus boosting growth, that is going to fade in the next few quarters.

Gold Price Forecast : 1300 by end 2013; 1000 by 2015

Nouriel Roubini : I wrote: 1300 by end 2013; 1000 by 2015. On track! - in Twitter

Roubini warns of Spanish Debt Trap

Speaking at a conference, New York University (NYU) Economics Professor Nouriel Roubini has offered his economic forecasts for Spain, stating that growth will not surpass 1 per cent during the next three or four years, Spanish daily El Economista reports.

Roubini added that growth will not be enough to reduce the excessive unemployment rate. Although he acknowledged that exports have improved, Roubini explained that Spaniards will find themselves in a debt trap as salaries fall in an internal devaluation necessary to improve competitiveness and as home prices fall, making households more indebted in turn hurting domestic demand.

Roubini, nicknamed Doctor Doom for his gloomy predictions, added that Spanish debt dynamics over the medium-term do not appear sustainable.

However, Spain, unlike Italy, no longer faces the risk of losing market access, Roubini pointed out. - See more at: http://www.ifamagazine.com/news/doctor-doom-warns-of-spanish-debt-trap-284312#sthash.MOAN5nG9.dpuf

Germany has come to understand that the eurozone is as much a political project as an economic one

Several developments helped to restore calm. European Central Bank President Mario Draghi vowed to do “whatever it takes” to save the euro, and quickly institutionalized that pledge by establishing the ECB’s “outright monetary transactions” program to buy distressed eurozone members’ sovereign bonds. The European Stability Mechanism (ESM) was created, with €500 billion at its disposal to rescue eurozone banks and their home governments. Some progress has been made on a European banking union. And Germany has come to understand that the eurozone is as much a political project as an economic one.
 Read more at http://www.project-syndicate.org/commentary/the-eurozone-s-unaddressed-problems-by-nouriel-roubini#SElp5KG16XLL8QAO.99

The Eurozone’s Calm Before the Storm

NEW YORK – A little more than a year ago, in the summer of 2012, the eurozone, faced with growing fears of a Greek exit and unsustainably high borrowing costs for Italy and Spain, appeared to be on the brink of collapse. Today, the risk that the monetary union could disintegrate has diminished significantly – but the factors that fueled it remain largely unaddressed.

Several developments helped to restore calm. European Central Bank President Mario Draghi vowed to do “whatever it takes” to save the euro, and quickly institutionalized that pledge by establishing the ECB’s “outright monetary transactions” program to buy distressed eurozone members’ sovereign bonds. The European Stability Mechanism (ESM) was created, with €500 billion at its disposal to rescue eurozone banks and their home governments. Some progress has been made on a European banking union. And Germany has come to understand that the eurozone is as much a political project as an economic one.

Moreover, the eurozone recession is over (though five periphery economies continue to shrink and recovery remains very fragile). Some structural reform has been implemented, and a lot of fiscal adjustment has occurred. Internal devaluation (a fall in unit labor costs to restore competitiveness) has occurred to some extent (in Spain, Portugal, Greece, and Ireland, but not in Italy or France), thus improving external balances. And even if such adjustment is not occurring as fast as Germany and other core eurozone countries would like, they remain willing to provide financing, and governments committed to adjustment are still in power.

But beneath the surface calm of lower spreads and lower tail risks, the eurozone’s fundamental problems remain unresolved. For starters, potential growth is still too low in most of the periphery, given aging populations and low productivity growth, while actual growth – even once the periphery exits the recession in 2014 – will remain below 1% for the next few years, implying that unemployment rates will remain very high. Read more at http://www.project-syndicate.org/commentary/the-eurozone-s-unaddressed-problems-by-nouriel-roubini#PhqTEVu3KTEdKr1Q.99

Government Shutdown Collateral damage : Jobs Report Won’t Be Released Oct. 4

Nouriel Roubini : Collateral damage of a shutdown: "Jobs Report Won’t Be Released Oct. 4 If U.S. Government Closed" http://bloom.bg/16QOhDO - in Twitter

Political Risks rise in Western Countries

Nouriel Roubini ‏: Political risks rise in West countries: US gov shutdown risk; Italian gov collapse risk; uncertainty on German gov; Greece & Portugal risks - in Twitter

Roubini : U S Growth Picture Is Sub par

Bloomberg TV 'Dr Doom' Roubini U S Growth Picture Is Sub par

Bloomberg TV News - Best Finance News .Roubini U S Growth Picture Is Sub par

The US is going to grow faster than other Advanced Economies

ET Now: You are bullish on the US compared to some other countries?

Nouriel Roubini : In relative terms, the US is going to grow faster than other advanced economies and since slowly bond yields are going to go higher, you may want to be gradually underweight on bonds. There will be some gradual rotation towards equities. Since equity valuations are still high, but by next year the US economic growth might be closer to potential.

Demand for Oil, Energy, Water and Food is going to increase in The Emerging Markets

ET Now: What about the argument that there is a growing population in the emerging markets and that will support grain prices because of the need to feed more mouths?

Nouriel Roubini: Certainly, demand for oil, energy, water and food is going to increase in the emerging markets, thanks to a growing population and increasing per capita income. Therefore, those commodities that are related more to the consumption growth in China and emerging market, in relative terms, might be the better placed - like oil - as transportation needs would sustain demand. However, industrial metals like copper, in less resource-intensive emerging markets, are going to do much worse in relative terms.

The Commodity Super Cycle is Over

ET Now: Do you think the commodity super cycle is over?

Nouriel Roubini : There are a number of factors as to why the commodity super cycle is probably over. First of all, China is slowing down. Their growth rate might be as low as 6% or 7%. Additionally, we have a slow recovery in advanced economies and since there the monetary policy is going to be tightened, however, gradual. The Fed eventually is going to start tapering, would eventually go away from zero policy rates and that increase in short and long rates is going to soften commodity prices as well. The dollar is going to strengthen over time because economic growth in the US is going to outperform the one in other advanced economies. The Fed is going to exit faster than other central banks.

Roubini: Fed May Take 3 Years to Normalize

Sept. 26 (Bloomberg) -- In today's "This Matters Now," Nouriel Roubini, chairman at Roubini Global Economics, talks with Tom Keene about the state of the U.S. economy, the Federal Reserve and inflation. He speaks on Bloomberg Television's "Bloomberg Surveillance."

Roubini : The Fed Will Be Slow to Taper

The Roubini Highlights: Fed Will Be Slow to Taper

Sept. 26 (Bloomberg) -- Nouriel Roubini, chairman at Roubini Global Economics, discusses the anemic state of global economies, his growth expectations for China and why the Federal Reserve will proceed slowly on tapering normalizing rates. He speaks on Bloomberg Television's "Bloomberg Surveillance."

China Slowdown hurting Commodity Markets : Nouriel Roubini

China slowdown hurting commodity mkts: Nouriel Roubini

China Economy wouldn’t get much worse

Nouriel Roubini : “The model of growth is unsustainable ... [but China will become] more consumption-oriented and less resource-oriented.” - in afr.com

The Fiscal Problems in the US are severe, but not as severe as in Japan

Nouriel Roubini : “The fiscal problems in the US are severe, but on a relative basis, they’re not as severe as in Japan, the euro zone and the UK,” he said. “The Fed will exit the zero-interest-rate policy faster than the BOJ, BOE and ECB [Bank of Japan, Bank of England and European Central Bank], and the dollar will strengthen.” - in afr.com

Roubini : Time to Buy Stocks

”You probably want to be underweight in bonds, and overweight in equities, mainly in the US,” Professor Roubini told attendees at IndexUniverse’s Inside Commodities conference on September 23, 2013.
“Higher interest rates will be a negative for commodities prices.”“The fiscal problems in the US are severe, but on a relative basis, they’re not as severe as in Japan, the euro zone and the UK,” he addded.
“The Fed will exit the zero-interest-rate policy faster than the BOJ, BOE and ECB [Bank of Japan, Bank of England and European Central Bank], and the dollar will strengthen.”“The model of growth is unsustainable ... [but China will become] more consumption-oriented and less resource-oriented.”

The Dollar Is Likely To Become Stronger

Nouriel Roubini : "The Dollar is likely to become stronger rather than weaker. The thing about the U.S. compared to other advanced economies...the fundamentals for the U.S. are much better - in CNBC

Inflation Is Not going to Be A Problem For The Next 2 Or 3 Years

"Those worried about inflation worry about all the money printing leading to that inflation. Inflation in advanced economies is going to be the least of problems developed economies will face in the next two or three years." - in CNBC

Roubini Urges Ukraine to Sign EU Accord Over Russian Deal

“If you join the EU, it means harmonization of regulation,” Roubini said, adding that the trade accord could boost Ukraine’s trade with “any part of the world.” - in Bloomberg

Roubini: U.S. Growth Picture Is Sub-par

Sept. 6 (Bloomberg) -- New York University economics professor Nouriel Roubini comments on the state of the U.S. economy from Cernobbio, Italy. He speaks on Bloomberg Television's "Countdown."

EMERGING MARKETS Decoupling Story Was Over-Hyped

NOURIEL ROUBINI : "Emerging Markets decoupling story was always over-hyped - Fed taper talk reaction shows EMs still linked to developed world." - in Twitter 
Related ETFs: iShares MSCI Emerging Markets (ETF) (EEM), iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI)

Nouriel Roubini told to remove hot tub from roof of Manhattan Penthouse

Nouriel Roubini, the economist who earned the nickname "Dr Doom" for predicting the financial crisis, has been ordered to remove the hot tub from the roof of his Manhattan penthouse.
http://www.telegraph.co.uk/news/worldnews/10287115/Nouriel-Roubini-told-to-remove-hot-tub-from-roof-of-Manhattan-penthouse.html
Mr Roubini, a senior economic adviser to Bill Clinton, reportedly bought the loft apartment in 2010 for $5.5 million (£3.5m) and installed a hot tub, deck and party room with a bar on the roof.

Big Strategy Game played again at Yalta Today

Nouriel Roubini ‏: "Big strategy game played again at Yalta today: should Ukraine sign the EU's AA and DCFTA or go for the Russian Eurasian custom union?"

"At Yalta high level West (the Clintons, high EU officials) facing Russian ones (Dvorkovich) to convince Ukraine to choose Europe over Russia"

"At Yalta where Stalin, Churchill and Roosevelt divided the post WWII world, high profile debate: should Ukraine go for the EU or Russia?"

"I am now headed to Yalta to attend the YES (Yalta European Strategy) Conference - YES " - in Twitter

The Fed caused a spike in long rates

"By too early taper talk starting in May the Fed caused a spike in long rates that weakened growth and forced it NOT to taper today." - in Twitter

The Tea Party Reps are now on a Jihad

Nouriel Roubini ‏: High risk now of a temporary government shutdown and an ugly fight on CR, debt ceiling and sequester as Tea Party Reps are on a jihad - in Twitter

The Fed is a Taper Tiger

"As The Economist put it the Fed is a Taper Tiger. But the consensus got wrong the "silence of the doves": they were fully data dependent "- in Twitter

Early Taper Talk Caused A Spike in Long Rates

"By too early taper talk starting in May the Fed caused a spike in long rates that weakened growth and forced it NOT to taper today." - in Twitter

Tapering : The Consensus Got It Wrong

"As The Economist put it the Fed is a Taper Tiger. But the consensus got wrong the "silence of the doves": they were fully data dependent." - in Twitter

The FED Should Not And May Not Taper Today

Nouriel Roubini : "Based on the weak macro data the Federal Reserve should not and may not taper today. If it does it will be taper-lite with stronger forward guidance and escape clause." - in Twitter

The Fed Cannot Taper Now

Nouriel Roubini : "New mortgages & refinancing applications are falling off the cliff as taper talk led to mortgage yields surge. How can the Fed taper now?" - in Twitter

World entering autumn of known unknowns

Global Times | 2013-9-17 21:53:01
By Nouriel Roubini 
During the height of the Iraq war, then-US Secretary of Defense Donald Rumsfeld spoke of "known unknowns" - foreseeable risks whose realization is uncertain. Today, the global economy is facing many known unknowns, most of which stem from policy uncertainty.

In the US, three sources of policy uncertainty will come to a head this autumn. For starters, it remains unclear whether the Federal Reserve will begin to "taper" its open-ended quantitative easing (QE) in September or later, how fast it will reduce its purchases of long-term assets, and when and how fast it will start to raise interest rates from their current zero level. There is also the question of who will succeed Ben Bernanke as Fed Chairman. Finally, yet another partisan struggle over America's debt ceiling could increase the risk of a government shutdown if the Republican-controlled House of Representatives and President Barack Obama and his Democratic allies cannot agree on a budget.

The first two sources of uncertainty have already affected markets. The rise in US long-term interest rates - from a low of 1.6 percent in May to recent peaks above 2.9 percent - has been driven by fears that the Fed will taper QE too soon and too fast, and by uncertainty surrounding Bernanke's successor.
Read More : http://www.globaltimes.cn/content/812189.shtml#.UjiOvz-rI7s

As Summers is out of Fed race it is again advantage Yellen

Nouriel Roubini : As Summers is out of Fed race it is again advantage Yellen. Other names, Blinder, Kohn, Ferguson, are unlikely. Main dark horse is Geithner - in Twitter

The only alternative to Yellen would be Geithner

Nouriel Roubini ‏: Right now it is a strong advantage for Yellen who is super qualified. The only alternative to her would be Geithner who doesn't want the job - in Twitter

5 years after Lehmans Collapse US Banks are even-bigger-to-fail

Nouriel Roubini ‏:
5 years after Lehman's collapse US banks are even-bigger-to-fail given consolidation: JPM taking over BS, BoFA taking CW & ML, WF taking Wac - in Twitter

Roubini ‏: Switzerland Still Most Competitive Economy

Nouriel Roubini ‏: Switzerland Still Most Competitive Economy as U.S., Germany Gain http://bloom.bg/1dEfqCi via @BloombergNews - in Twitter

Gold has fallen 21% this year!

Nouriel Roubini ‏: Gold Heads for Worst Weekly Loss Since June Before Fed Meets - Bloomberg http://mobile.bloomberg.com/news/2013-09-13/gold-heads-for-worst-weekly-loss-since-june-as-fed-seen-tapering.html?cmpid= … Gold has fallen 21% this year! - in Twitter

Goldman Sees Risk of Gold Below $1,000 on U.S. Economy , I made the same forecast 5 months ago

Nouriel Roubini ‏: Goldman Sees Risk of Gold Below $1,000 on U.S. Economy - Bloomberg http://mobile.bloomberg.com/news/2013-09-13/goldman-sees-risk-of-gold-below-1-000-as-u-s-economy-gains-1-.html?cmpid= … I made the same forecast 5 months ago - in Twitter

Nouriel Roubini ‏: Known Unknown in the US: Another ugly fight on the Debt Ceiling?

Nouriel Roubini ‏: "Known Unknown in the US: Another ugly fight on the debt ceiling? Will the government shutdown on a CR showdown? Will sequester be replaced?"
"Known Unknown in the US: when will Fed start taper & how fast? Who will be the next Fed chair? When will the Fed exit 0% rates & how fast?" - in Twitter

3 Sources Of Policy Uncertainty Will Come To A Head This Autumn

Today, the global economy is facing many known unknowns, most of which stem from policy uncertainty. "In the United States, three sources of policy uncertainty will come to a head this autumn. For starters, it remains unclear whether the Federal Reserve will begin to “taper” its open-ended quantitative easing (QE) in September or later, how fast it will reduce its purchases of long-term assets, and when and how fast it will start to raise interest rates from their current zero level. There is also the question of who will succeed Ben Bernanke as Fed Chairman. Finally, yet another partisan struggle over America’s debt ceiling could increase the risk of a government shutdown if the Republican-controlled House of Representatives and President Barack Obama and his Democratic allies cannot agree on a budget.

The first two sources of uncertainty have already affected markets. The rise in US long-term interest rates - from a low of 1.6 percent in May to recent peaks above 2.9 percent - has been driven by market fears that the Fed will taper QE too soon and too fast, and by the uncertainty surrounding Bernanke’s successor.

So far, investors have been complacent about the risks posed by the looming budget fight. They believe that – as in the past – the fiscal showdown will end with a midnight compromise that avoids both default and a government shutdown. But investors seem to underestimate how dysfunctional US national politics has become. With a majority of the Republican Party on a jihad against government spending, fiscal explosions this autumn cannot be ruled out." - in Project Syndicate

Roubini: The DJIA is Useless as an index of the US Stock Market

Nouriel Roubini: The DJIA is useless as an index of the US stock market as "losers" are dropped and "winners" are added on a regular basis - in Twitter

Roubini Expects Recovery to be 'at best weak'

Roubini's Reasons for caution : Nouriel Roubini, chairman of Roubini Global Economics, expects recovery in the west to be 'at best weak'. He talks to Sarah Gordon, Europe business editor, about the risks he sees in the US and eurozone as well as vulnerability in emerging markets

Sign of Labor Market Weakness

"Fall in unemployment rate is driven by fall in labor force participation rate, sign of labor market weakness with more discouraged workers." - in Twitter

Roubini ‏: US Growth is weak Capex weak, Housing weaker

Nouriel Roubini ‏: US growth is weak <2%: capex weak, housing weaker,consumption flat in July, net exports weak, fiscal drag. So most components of demand weak - in Twitter

Bond Yields Mispriced

Nouriel Roubini ‏: Tapering of September Tapering. The Fed should not start tapering given mediocre GDP growth and labor market. Bond yields mispriced - in twitter