Roubini Says U.S. May Fall Victim to Bond `Vigilantes' Within Three Years

[marmar]

Is Greece just a test drive?



Roubini Says U.S. May Face Bond ‘Vigilantes’ Within Three Years
By Jennifer Ryan

May 18 (Bloomberg) -- The U.S. may fall victim to bond “vigilantes” targeting indebted nations from the U.K. to Japan in a potential second stage of the financial crisis, New York University professor Nouriel Roubini said.

“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the U.K., in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics today. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.’”

The euro touched a four-year low against the dollar today on concern nations with the largest budget deficits will struggle to meet the European Union’s austerity requirements. Roubini, speaking in a lecture hall packed with students who then queued to meet him at a book-signing, suggested that the public debt burden incurred after the banking panic of 2008 may now cause the financial crisis to metamorphose.

“There is now a massive re-leveraging of the public sector, with budget deficits on the order of 10 percent” of gross domestic product “in a number of countries,” Roubini said. “History would suggest that maybe this crisis is not really over. We just finished the first stage and there’s a risk of ending up in the second stage of this financial crisis.”

The U.S. posted its largest April budget deficit on record as the excess of spending over revenue rose to $82.7 billion. The federal debt is currently projected to reach 90 percent of the economy by 2020. ..........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aXv.FAdyLJDs&pos=7

[dipsydoodle]

1. But in less than 3 years

European Union finance ministers have agreed to introduce tougher regulation of the hedge fund industry.

Ministers overrode objections by the new UK government and the City of London, where 80% of European funds are based.

They will now negotiate with the European Parliament to decide the exact shape of the legislation - which is due to come into force from 2012.

http://news.bbc.co.uk/1/hi/business/10120925.stm

And Germany starts the lockout tomorrow : http://news.bbc.co.uk/1/hi/business/10124174.stm

[lutherj]

2. I read the piece at the link, but I'm still unclear what a "bond vigilante" is.

Are these capitalists who have figured out how to take advantage of public debt, or a public unwilling to shoulder any more debt?

:shrug:

[no_hypocrisy]

3. They sound like corporate raiders and hostile takeovers of corporations,

only in mega-way. In this case, they control the economies of countries, effectively own them.