Roubini-A Perfect Storm for Global Economic Failure?


Are We Riding The Andrea Gail

Are we facing a perfect storm which threatens the Global economy? Nouriel Roubini, NYU Professor, who predicted the 2007-2008 crash, believes we have the makings of a global crash. He states that we are kicking the can down the road and the can is getting bigger and heavier with public and private debt. But that is not all.

Roubini writes: Elevated U.S. unemployment, a surge in oil and food prices, rising interest rates in Asia and trade disruption from Japan’s record earthquake threaten to sap the world economy. Stocks worldwide have lost more than $3.3 trillion since the beginning of May…financial markets by the middle of next year could start worrying about a convergence of risks in 2013.

The MSCI AC World Index has tumbled 4.9 percent this month on concern recent data, including an increase in the U.S. unemployment rate to 9.1 percent in May, signal the global economy is losing steam. U.S. Treasuries rose last week, pushing two-year note yields down for a ninth week in the longest stretch of decreases since February 2008, on bets the Federal Reserve will maintain monetary stimulus.

World expansion may slow in the second half of 2011 as “the deleveraging process continues,” fiscal stimulus is withdrawn and confidence ebbs, Roubini also said.

Roubini said two days ago that in the U.S., a failure to address the budget deficit risks a bond market “revolt.” “We’re still running over a trillion-dollar budget deficit this year, next year and most likely in 2013,” Roubini said in a speech in Singapore on June 11. “The risk is at some point, the bond market vigilantes are going to wake up in the U.S., like they did in Europe, pushing interest rates higher and crowding out the recovery.” Read more here: Bloomberg News – The Perfect Storm