Monday, Aug 18, 2008
The Permabear
The New York Times: Dr Doom
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.”
Posted by sold out @ 10:26 AM (886 views) Add Comment
7 Comments
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1. malct said...
from the article
But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis.
“Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”
2. malct said...
more from the article
“A good third of the regional banks won’t make it,” he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. “Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”
3. malct said...
quote from Roubini -
“Once you run current-account deficits, you depend on the kindness of strangers,” he said, pausing to let out a resigned sigh. “This might be the beginning of the end of the American empire.”
current-account deficits? now there's a thing - note the minus before the 7
1 China $ 360,700,000,000
188 United States $ -738,600,000,000
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html
4. malct said...
on the same theme, interesting to see the brief details of the articles author!
Stephen Mihm, an assistant professor of economic history at the University of Georgia,
is the author of “A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States.”
His last feature article for the magazine was about North Korean counterfeiting.
5. plato said...
You will find in most cases that there is an automatic rejection to views and theories from a genuine source not towing the accepted line. This is invariably due to pre-conceived imaginary security. i.e: One feels safe with the present so why jeopardise this?
Roubini falls into this catagory of not towing the accepted line. He is not 'anybody' though, he has the necessary credentials.
When confronted with these alternative views he was/is labled as if those are the reasons for his conclusions. So words like 'doom' and 'pessimist' become the reasons for his thoughts. A true diversion has arisen.
This is the biggest mistake, by applying emotion to his technically backed conclusions. Even when he says he's a realist he is pushed into extoling some kind of emotion. As a human he must have this,but it is totally irrelevant.
The point is : He has been right so far and the probability is: He will be right again. Never mind whether he is sad happy or what? He does not seperate things for comfort,He seperates them for analysis and points out that HPC is part of a far greater financial bubble.
There are numerous 'ways' but there is only one 'right way'. Has Rubini simply shown the 'numerous ways' for what they are?
6. last_days_of_disco said...
Note that he isn't calling the Great Depression, which is what Robert Prechter has been doing.
I wonder why he feels things won't go that way? Maybe its because there are lots of people who are watching and preventing some of the disasters.
Its interesting to note that he supports all the bailouts and says the US government has no choice. I think Prechter says the same.
7. icarus said...
It's worth looking at Roubini's intellectual pedigree. One of his mentors was Jeffrey Sachs. Naomi Klein tells the following story in The Shock Doctrine: Back in the mid-80s Reagan declared war on Bolivia's coca farmers and at a stroke cut the country's export revenues by half. This caused hyperinflation and an exodus of people looking for work elsewhere.
The 1952 revolution in Bolivia had brought in land reform, the partial breaking of colonial exploitation and the nationalisation of natural resources such as tin, trade protection, subsidies and co-operatively-run workplaces.
Sachs went to the country in '85 to advise on dealing with the hyperinflation. He recommended the dismantling of the revolution, a war on the workers and the poor. He advised a massive increase in the price of oil and price deregulation generally, including the elimination of food subsidies, wage freezes, the abolition of the minimum wage, deep budget cuts and the downsizing of state companies, softening them up for privatisation. The last led to mass layoffs in the tin mines.
The government had not been elected on this platform. Sachs recommended that the policy be implemented swiftly, before the people knew what had hit them. It was hatched in backroom deals and implemented as quickly as was technically possible. The police and army crushed popular protest and labour leaders were disappeared in their hundreds. The rich got richer and the poor got poorer.
The economy started to recover only two or three years later, thanks to...er...the re-emergence of coca production, which again accounted for more than half Bolivia's exports.
Sachs took credit for beating hyperinflation, not in a fascist coutry like Pinochet's Chile etc., but in a democratic country!!!!!!!!
Roubini talks of the 'panics' that 'swept' many parts of the world in the late 1990s. He makes no attempt to place them in a larger context, where the major players are Washington, central banks, the World Bank, the IMF, the WTO and the electronic herd - the speculators who can move capital about and destabilise and enslave any country. Their aims for all countries include deregulation, privatisation and deep cuts in government spending and there are threads that can be traced from Pinochet in 1973 to these more recent 'panics' and the policies leading, for example, to the wealth of the Russian 'oligarchs' and the Chinese 'princelings'.