Wednesday, Aug 13, 2008
Roubini says world economy is ****ed - full text
RGE Monitor: Roubini: The Perfect Storm of a Global Recession
"Still all G7 central banks are now worried about the temporary rise in headline inflation. So for now they are all on hold or threatening to hike policy rates to fight potential inflation risks. But over time severe recession risks and the risk of a severe banking and financial crisis - with credit losses now estimated to be at least $1 trillion and possibly as high as $2 trillions and hundreds of banks going bust - will force all G7 central banks to cut further policy rates. But this policy easing will be too slow and delayed, especially outside the US, and will occur only when the G7 and global recession will become entrenched. Thus, the policy response to this upcoming perfect storm will be too little too late to prevent it."
Posted by mountain goat @ 01:36 PM (636 views) Add Comment
5 Comments
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1. techieman said...
Yes - this all makes sense to me and I think MG this was what we were discussing. I also do believe this inflation is temporary BUT if the BOE doesnt increase rates it is worried that gives the wrong signal to the public re expectations of continued inflation and therefore a winter of discontent and a wage / price spiral (albeit in the public sector only because i cant see the public sector being able to increase wages when order books are down / input prices are up and more and more of them are unable to maintain margins).
Alternatively the inflationary pressures lose to the deflationary ones re the fractional banking system. Either way the policy makers only have the IR weapon to use, which in this case doesnt have enough flexibility nor enough clout for that matter at the moment. Fiscal stimulus? Nope cant afford that!!!
2. jack c said...
Guy's an article in this weeks fund strategy publication is (IMO) worth a quick read - see www.fundstrategy.co.uk/cgi-bin/item.cgi?id=171013&d=11&h=312&f=311 - View from America: 'Sell Britain'
Mike Trudel, of BlackRock in America, says Britain’s economy is too dependent on its financial sector, his firm’s Global Allocation fund may hold lessons for British fund managers. The New York Times reported last week on how Europeans are elbowing aside the wealthy of the Upper East Side as they snap up luxury goods up and down Fifth Avenue. The euro has doubled in value against the dollar since 2002, and even sterling is still 25% ahead. The article was headlined “We’ll take Manhattan, for cash”. But when American investment managers look across the pond – and at Britain in particular – they are not exactly envious. What they see is an economy with many of the same characteristics as America’s – just worse.
Mike Trudel is research vice-president for BlackRock in Princeton, New Jersey. He works on the Global Allocation fund, a retail fund with £25 billion under management – that is four times the size of the biggest retail fund in Britain. “In our opinion, of all the major economies, the one we have the least confidence in over the near term is the UK,” says Trudel. In other words, there’s a great big “Sell” recommendation on Britain, if that’s what BlackRock and other American managers think.
“The UK is much more dependent on the financial sector than any other major economy. Around 20% of private sector jobs in the UK are in the financial sector, which is far more than in the US. Those jobs must be at risk as the financial sector restructures. We believe that financials will remain under pressure, and we’re more comfortable buying UK gilts than equities.”
Not that Trudel is saluting the Stars and Stripes. The Global Allocation fund is deeply underweight American equities as well. It is also light on mainland European equities. The overweights are in Asia and Latin America.
They also give a view on Oil/Commodities/Financials
3. Gregooo99 said...
Wonder how much this guy is paid to state the obvious.
4. malct said...
I thought this was housepricecrash.co.uk !
and the relevance of this is ?
wouldn't you be better off on an investment webshite ?
5. mountain goat said...
malct
Relevance to HPC is that a recession means jobs are lost. So people can't pay their mortgage repayments or pay the rent if they are renting. This will have a big effect on house prices and the BTL market.