RGE Lead Analysts | Nov 1, 2008
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“ Mr. Roubini, Can you share your thoughts on one point. Would JP Morgan's plan--and any like plans in the future-- to modify mortgages come back to... more ”
By Guest 11-01-2008
“ Nouriel, thank you for your great blog! Please continue to blog even when you get some interesting position in the new administration ”
By Guest 11-01-2008
“ Last Thread: "I am guessing that CA stands for California. Just out of curiosity, are you in Northern California or Southern California? " When I... more ”
By PeteCA 11-01-2008
“ You make a very important point, notwithstanding that it's not yet November 5th. I would suggest that should he be elected, his honeymoon with respect... more ”
By Guest from Canada 11-01-2008
“ I have heard Nouriel say the the dollar in the long term is a cooked goose and that it won't be the world's reserve currency, also that this will be a... more ”
By Guest 11-01-2008
“ RGE content: Really great oversight, congrats and THX! Maybe someone could you start eleborating more on Obamas economic policy. Next week would be... more ”
By Sasch 11-01-2008
“ I have been following up on Roubini's posts and his predictions usually turn out to be very accurate. In fact he might have been the one who prevented... more ”
By Guest 11-01-2008
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On Nouriel Roubini's Global EconoMonitor, Nouriel Roubini warns that the worst in markets and economies is yet to come. On October 23rd, Nouriel predicted the potential shutdown of financial markets. A day later U.S. stock futures suspended trading after declines of more than 6% at opening tripped the circuit breakers. Nonetheless, Nouriel does not expect another Great Depression, but states that policymakers must act quickly and wisely.
Here are the main elements of Nouriel’s outlook: Tsunami of corporate defaults; 2-year U-shaped U.S. recession that threatens to turn into an L-shaped one if policymakers do not regain control of the financial system; global re-coupling to the U.S. will advance from non-U.S. markets to non-U.S. real economies – not even the strongest emerging markets such as Brazil and China will escape global re-coupling; vicious cycle of deflation in goods markets, labor markets, commodity markets, financial markets, corporate and household earnings, and aggregate demand; de-leveraging to reduce excess debt in municipalities, households and some firms; U.S. stock markets declining another 20-30%, bottoming fall 2009 at the earliest, then moving sideways for years post-recession if growth remains anemic as it did in Japan after its 1990s real estate and equities bust; U.S. unemployment rise to reach 8-9%; the demise of the shadow banking system.
According to Nouriel, USD assets, commodities, U.S. and international equities, housing, and the USD are quite risky right now. Seek safety in cash or cash-like instruments such as T-bills and bonds of safe, large governments. Though he believes the U.S. dollar will retain its reserve currency status for decades, its status will gradually erode.
Given the size of the expected contraction in private aggregate demand (likely to be about $450 billion in 2009 relative to 2008), Nouriel argues that a fiscal stimulus to the order of $300 billion minimum (and possibly as large as $400 billion) will be necessary to partially compensate for the sharp fall in private aggregate demand.
http://www.rgemonitor.com/blog/roubini