Roubini : China will see a significant slowdown in growth in 2012

Nouriel Roubini Bloomberg TV Interview 20 January 2012 : Nouriel Roubini talks about the outlook for the global economy and China-U.S. relations : I expect there is going to be a significant slowdown in growth (in China ) this year we are going to see it already in the Q1 numbers , if you look at the data , housing is deflating commercial real estate is deflating that's going to be dragged on growth and also their export growth is slowing down from 18 percent to 12 , only 5 percent to Eurozone -2 to Italy , so those two factors are going to slowdown growth .....

Roubini : Oil prices are going to go higher

Nouriel Roubini : “Most problems facing the global economy are not temporary or random,”
“energy and food insecurity aren’t going to go away.”
“Oil prices are going to go higher,” “This has not been a typical recession, it was a balance sheet crisis caused by too much leverage,” said Roubini, adding “studies suggest it could take up to a decade to reduce debts and deficits.” - Nouriel Roubini was a key speaker at Bloomberg Tradebook conference held in New York last Thursday.

The Canadian house prices could correct by 10 per cent

Nouriel Roubini : “If [a 10 per cent correction] were to occur, some pain would occur, but it [would be] manageable,” he said. “I don’t think that the bubble is so severe that you will have a real huge housing bust as long as the economy continues growing at reasonable rates.” - In an interview with The Huffington Post on Tuesday

Roubini Optimistic about the Canadian Economy

Nouriel Roubini : “The resource orientation of Canada is one the sources of its strength,” he said. “While there may be a slowdown in China, the forces that lead to demand for commodities being high and rising -- urbanization, industrialization, population growth, per capita income growth in emerging markets -- I don’t think they’re going to change even if there are some bumps down the road.” - In an interview with The Huffington Post on Tuesday

Roubini : Even Canada to Be Hurt by Europe Crisis

Nouriel Roubini : “Even Canada, which has had much better financial fundamentals, cannot fully decouple from Europe and the U.S.,”
“Canadian economic growth will be below potential because of economic headwinds from Europe and America.”
said Roubini, in a speech in Toronto yesterday. - via bloomberg

Roubini on The break up of the Eurozone

Nouriel Roubini : You have to assign probability to something disorderly happening in the Eurozone and you have to assign some probability to disorderly default and even a break up of the Eurozone not in the next six to eight months, but certainly over the next two or three years. If that break up of the Eurozone were to occur, the systemic effects of it could be much bigger than the disorderly default of Lehman Brothers in the fall of 2008. This is because Lehman Brothers was a $600 billion problem while the public debt of Italy and Spain alone are a 3 trillion euros or about 4 trillion dollars. Therefore, if there was a disorderly default by Italy and or Spain that will be a shock that will be systematically more important than even the disorderly collapse of the Lehman Brothers. I am not predicting that to happen in the next six to eight months, but you have a set of countries in the Eurozone, Greece, Ireland, Portugal, Italy and Spain of which each one of them with different probability could have a possible restructuring of their private and public debt. And one of them with different probability could eventually exit the Eurozone. If a combination of these events were to occur, the systematic facts on the global economy will be absolutely as severe or actually more severe than what happened in 2008. I am not saying that it is going to happen with probability 1, but you have to consider this is an important tail-risk that has a meaningful probability that would have a systematic effect on the global economy over the next few years.

Which Asset Classes Roubini recommends for 2012 ?

Nouriel Roubini : My global economic outlook is one in which while there will be economic growth, there are significant downside risks that imply risk of recession in the Eurozone, even the UK, slow economic growth in other advanced economies like the US and also slower economic growth compared to last year in most emerging markets. There is economic vulnerability with financial tail-risk and investors are going to remain risk averse. Therefore like last year global equities might move sideways without any clear trend. When risk is on, they might go higher, but when risk is going to be off, it is likely they are going to move downwards. Therefore, I do not see a significant outperformance of global equities in this environment. In this environment, commodities might also move sideways because while emerging markets are still growing robustly, economic growth in most advanced economies is going to be weak. Geopolitical risks in the Middle East like a potential confrontation within Israel, US and Iran could lead to a risk premium in oil prices. We are still in a world in which there are many tail-risks and therefore it is better to be a safe rather than sorry. An investor will be better off by investing into safe bonds of government and countries that do not have significant fiscal vulnerabilities or in companies that have very strong balance sheet in terms of having low debt leverage, high dividends. Companies that are multinational corporations both in advanced economies and emerging markets with sound balance sheets and sound P&Ls probably might outperform. We live in a world in which there will be lots of tail-risks and therefore being defensive in terms of global asset allocation and less exposed to a variety of risky assets, whether it is commodity or equities and being more exposed to things that are more liquid and safe, might be a strategy that minimizes some of the downside risks. - in ET Now

No Hard Landing, but a Slowdown of growth for China in 2012

Nouriel Roubini : I do not expect a hard landing, but a slowdown of growth for China in 2012. My view is more bearish than consensus. Chinese growth is going to be around 8% this year, much lower than what it has been in the last few years. There is a risk of hard lending, but that hard lending may materialize only in 2013 or 2014. There is a delicate political transition in China by November, to choose a new President and Premier and therefore China is going to do anything necessary to prevent the hard lending from occurring. The problem with China is that the growth model is not sustainable. It is based on net export growth. Fixed investment is now 50% of GDP, on high savings and with a very low level of consumption right now is only one-third of GDP. So unless China can consume more, save less, reduce net exports and fixed investments and make its growth more balanced eventually China could have a hard lending, but that is a 2013-2014 story. As far as India is concerned, there has been a slowdown of economic growth in the last few quarters. The economic data is mixed and this year growth might be only 7%. India is facing a variety of issues, fiscal deficit, current account deficit that has to be financed. The rupee has been weakening. Inflation until recently had been rising and more importantly there has been a policy stalemate. A number of structural reforms have to be undertaken in order to make sure that potential growth becomes higher so that India can grow faster without causing higher inflation. Owing to coalition politics, a wide range of important state elections coming up in the next few months, the policy has been essentially in a stalemate. Important economic and structural reforms that should be undertaken have been essentially stalled. That is not good news for accelerating economic growth over time.

The probability that Germany is going to accept aggressive monetary easing, a weaker Euro and a fiscal stimulus is very low

Nouriel Roubini : There have been baby steps taken in the Eurozone. The problem right now in the Eurozone is that there is a double dip recession. Not just in the periphery of the Eurozone, but the latest data from some parts of the core shows that there is a beginning of recession, rise in sovereign spreads in some parts of the core and banking problem even in the core of the Eurozone. Unless you restore economic growth, anything that you do in terms of fiscal austerity and reform is not going to be sufficient. Austerity in the short run makes the recession worse because you are raising tax and cutting government spending. In order to restore growth and, therefore, make the Eurozone viable and sustainable, you need a whole series of different policies. The ECB has to aggressively cut rates, do quantitative easing, credit easing. The ECB has to become a lender of last resort not just for the bank but for the sovereign. The value of the Euro has to fall another 20-30% and if the periphery of the Eurozone is going to engage in recessionary and depressionary fiscal austerity, Germany and core of the Eurozone should postpone their fiscal austerity and should do fiscal stimulus. The probability that Germany is going to accept aggressive monetary easing, a weaker Euro and a fiscal stimulus is very low. Therefore, the recession of the Eurozone is going to get worse and the fiscal and financial problems of the Eurozone are going to get worse rather than getting better.

The fiscal, sovereign , financial and banking strains in the Eurozone are going to remain severe

Nouriel Roubini : The problem is that the ECB is going to do more to backstop the banks and the financial system, but for a number of legal and institutional reasons, the European Central Bank is not going to become a last resort lender for the sovereigns. Unlike the Federal Reserve where there is a dual mandate, growth, inflation and financial stability, the ECB has only one mandate, that of price stability. There are legal and institutional constraints in the willingness and ability of the ECB to play a greater role. Yes, they are going to play a greater role, but the fiscal, sovereign and financial and banking strains in the Eurozone are going to remain severe. There is going to be only partial willingness of the ECB to address them.

In the Eurozone sovereign and banking risks are highly interrelated with each other

Nouriel Roubini : In the Eurozone sovereign and banking risks are highly interrelated with each other. The banking risk became sovereign when the banks were bailed out, but now sovereign risk has become a banking risk because a large part of the public debt is held by the banking system. Right now there is a credit crunch and this credit crunch is becoming more severe because banks do not have enough capital, liquidity and have to reduce their leverage by essentially reducing credit and disintermediating. That's going to create more credit crunch. ECB is not a last resort for the sovereign, but has been increasingly playing a role of lender of last resort for their financial system. Without the liquidity support by the ECB, the credit crunch, deleveraging and the run on the banks will become even more severe. - in ET Now

The Economic Growth to remain anaemic in the United States in 2012

Nouriel Roubini : Good news is going to be temporary. In terms of some of macro data, the US has been better than expected, but economic growth in the US is going to be anaemic this year. Subpar below trend, at best 1.5% growth year over year for a number of reasons. First of all, the problems of the Eurozone and through trade and financial links, those are going to slow down economic growth in the United States. Secondly, there will be a significant fiscal drag in the United States this year because of the gridlock in Congress. Thirdly, since domestic demand is going to be weak because of private and public sector deleveraging, the way that the US could grow faster is by an improvement in net exports. However, trade balance is not going to improve because growth is slowing down in the rest of the world and Europe. That's going to be bad for US exports. Also, the dollar is going to be stronger and not weaker and that's going to worsen the US trade balance. Oil and energy prices are going to remain high because of geopolitical risks in the Middle East and, therefore, the oil import bill for the US is not going to improve. Therefore, the net exports of the US are not going to improve and that's going to be another factor that's going to be a source of economic weakness. Finally the US consumer is still very challenged both income-wise, wealth-wise and debt-wise. Income is not growing very much because the labour market is improving only weakly. The wealth has been sluggish because equity market has been flat and housing prices have been falling. The US consumer still has a huge amount of debt and debt servicing. The cost of deleveraging of the US consumer has been just postponed. All these factors suggest that economic growth is going to remain anaemic in the United States in the next few quarters. - in ET Now

Roubini : Overall Bullish on The US Dollar

Nouriel Roubini : US dollar tends to strengthen when there are periods of risk off and risk aversion in the global economy. When there are episodes of risk aversion deriving from trouble in the Eurozone or geopolitical risk, people tend to dump emerging market currencies, euro and seek safety of the US dollar, US treasuries. This is not because economic, financial and fiscal conditions in the US are very good, but the US is the least ugly in a contest where the issue is not who is the prettiest or more handsome, but who is the least ugly. That overall might be bullish for the US dollar again, not because things are great in the United States, but just because in relative terms, they are worse in other parts of the world.

Euro should fall to parity with the Dollar for EU nations to survive

Nouriel Roubini : Given the economic and financial difficulties of the Eurozone, the euro should be weakening. There is a sovereign risk, risk of a break up. The European central bank is easing monetary policy while the FED for the time being is on hold. On a fundamental basis while Germany can live away with the euro at current level because it is over competitive, the countries in the periphery of the Eurozone left to a chance to survive in the Eurozone have to have a much weaker value of the euro. The euro should be falling on a fundamental basis towards a parity with the US dollar to give a fighting chance for Greece, Ireland, Portugal, Italy and Spain to survive in the Eurozone. In the next few months as these economic and financial difficulties of the Eurozone are going to become more exacerbated and the policy solutions are going to be limited, then the euro is going to weaken relative to the US dollar.

Roubini : India Better Than Other BRIC Nations

Nouriel Roubini : India is “better placed” in BRIC nations as Brazil faces slowing growth, Russia’s economy isn’t “well diversified” and China’s model is being “challenged,”
“In relative terms, India is actually positioned well,” Nouriel Roubini said in an interview with Bloomberg UTV

Roubini : No Eurozone break-up in 2012

Economist Nouriel Roubini interviewed by the Indian TV ET Now this 11 January 2012

Nouriel Roubini : The economic and financial conditions of the Eurozone are very severe. Germany and France cannot impose their will on all the other countries because the decision of the Eurozone had been taken by consensus. The trouble with the Eurozone right now is that you have severe stock imbalances, large stocks of public debt, liabilities of their financial system and flow problems. There has been the loss of competitiveness at the periphery of the Eurozone. There are large external imbalances and all the policies that the Europeans are pursuing right now, fiscal austerity are going to make the recession in the Eurozone worse. Not just Greece, but a number of other countries over the next couple of years will have to restructure their public debt and private ones in a coercive way. I also expect that one or more members of the Eurozone will eventually exit the Eurozone. If it is a small Greece exiting, that can be managed. If eventually it were an Italy or Spain having to exit, that would effectively be a break up of the Eurozone. So of all the sources of systemic risk in the global economy, certainly the problems of the Eurozone are the most severe.

Nouriel Roubini in India

Nouriel Roubini is in India "I arrived to New Delhi for policy, private sector and media meetings and to visit the new RGE office in India where a dozen economists work" he wrote in a twitter message announcing his arrival to New Delhi

The emergence of income and wealth disparities is rapidly growing

Nouriel Roubini wrote in a recent article " Of course, the malaise that so many people feel cannot be reduced to one factor. For example, the rise in inequality has many causes: the addition of 2.3 billion Chinese and Indians to the global labor force, which is reducing the jobs and wages of unskilled blue-collar and off-shorable white-collar workers in advanced economies; skill-biased technological change; winner-take-all effects; early emergence of income and wealth disparities in rapidly growing, previously low-income economies; and less progressive taxation." - in project-syndicate

The Swiss Franc to suffer from The Hungarian mortgages Crisis

Nouriel Roubini : "Collateral damage to Swiss Franc linked Hungarian mortgages @lindayueh: #Hungary forint hits new record for 3rd day against euro:321.6 +1.3%" wrote professor Nouriel Roubini in a twitter message directly from old Europe where he is now , "In 2012 hungary may have a financing gap as large as 10% of GDP putting pressure on reserves and currency" he added in another twitter message

Roubini : Ireland economy is clearly double-dipping

"Ireland is clearly double dipping : Irish Services PMI falls to 48.4 in Dec down from 52.7 in Nov, lowest level since Dec '10" wrote economics professor Nouriel Roubini in a twitter message from Germany where he is giving a speech on the 2012 global economic outlook . The EuroZone is falling into a recession and the core EuroZone is not immune from it he explained in another twitter message