Apr 13

-The Entire Economy Is a Ponzi Scheme (ZeroHedge, April 13, 2013):

Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky, the Wall Street Journal and many others say that our entire economy is a Ponzi scheme.

Former Reagan budget director David Stockman just agreed:


YouTube Added: 10.04.2013

So did a top Russian con artist and mathematician.

Even the New York Times’ business page asked, “Was [the] whole economy a Ponzi scheme?

In fact – as we’ve noted for 4 years (and here and here) – the banking system is entirely insolvent. And so are most countries. The whole notion of one country bailing out another country is a farce at this point. The whole system is insolvent.

As we noted last year: Continue reading »

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Feb 09

- Currency Wars Often Lead to Trade Wars … Which In Turn Can Devolve Into Hot Wars (ZeroHedge, Feb 8, 2013):

Currency War → Trade War → Hot War?

According to numerous high-level insiders, the global currency war is accelerating: Continue reading »

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Feb 24

- ‘Gold Bullion or Cash’ Shows Buffett, Roubini, Krugman Mistaken; Faber, Rogers, Bass, Einhorn, Gross Correct (ZeroHedge, Feb. 25, 2012)

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Dec 15

Update:

- The Gold Sell Off Is Likely Coming To An End As Negative Gold Lease Rates Collapse

Related info:

- JP Morgan Crashed MF Global to Avert COMEX Failure, They Stole All The Accounts That Were Going To Take Delivery – (Jim Rogers: QE Has Never Stopped – QE 3 Is Operation Twist)

- Jim Rogers: QE NEVER STOPPED – The Fed Is Lying About QE 3 – Rising Money Supply Proves There Is QE 3 – On MF Global (Video)


- Roubini Asks of ‘Goldbugs’ on Twitter “Where is 2,000?” – Ignores Academic Research (ZeroHedge/Gold Core, Dec. 14, 2011):

Gold is trading at USD 1,626.10, EUR 1,261.20, GBP 1,067.30, CHF 1,557.40, JPY 129,550 and AUD 1,643.0 per ounce.

Gold’s London AM fix this morning was USD 1,635.00, GBP 1,055.32, and EUR 1,255.18 per ounce.

Yesterday’s AM fix was USD 1,665.00, GBP 1,068.75, and EUR 1,262.22 per ounce.


Gold in USD – 1 Yr (100, 144, 200 DMA – yellow line at $1,618/oz)

Gold is marginally higher in most currencies today and bargain hunters are beginning to buy after the recent price falls. The falls were due to recent dollar strength, liquidity issues in the financial system and weak technicals.

Continue reading »

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Jun 13

See also:

- Greece: Default Is Inevitable

- Germany’s Rating Agency Feri Downgrades US Government Bonds: AAA to AA!

- China’s Rating Agency: ‘In Our Opinion The United States Has Already Been Defaulting’

- St. Louis Federal Reserve President Sees US Default As Big Global Risk (Reuters)


- Roubini Says a ‘Perfect Storm’ May Converge on the Global Economy in 2013 (Bloomberg, Jun 13, 2011):

A “perfect storm” of fiscal woe in the U.S., a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy, New York University professor Nouriel Roubini said.

There’s a one-in-three chance the factors will combine to stunt growth from 2013, Roubini said in a June 11 interview in Singapore. Other possible outcomes are “anemic but OK” global growth or an “optimistic” scenario in which the expansion improves.

“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”

Continue reading »

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Mar 13

See also:

- Gasoline Cost to Jump $700 For Average US Household

- Speculators Anticipate Even More Powerful Move In Oil Prices Than In Summer Of 2008 When Crude Hit $150


Nouriel Roubini, the economist who correctly predicted the global financial crisis, warned on Thursday that some advanced economies could experience a double dip recession if the price of oil climbs to $140 a barrel.

“It the turmoil in the Middle East becomes much worse and the price of oil reaches $140-150 a barrel then the risk of a double dip recession increases,” Roubini said in a keynote speech here at MIPIM, the world’s annual gathering of real estate professionals.

World oil prices fell back Thursday after spiking sharply higher a day earlier, with New York’s main contract, light sweet crude for delivery in April, dropped 32 cents to $104.06 a barrel. Brent North Sea crude for April shed 51 cents to $115.43.

Several analysts have forecast oil could again reach the record $147 it set July 2008 before the onset of the global financial crisis if unrest spreads through the Middle East.

Continue reading »

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Mar 08

Washington’s Blog strives to provide real-time, well-researched and actionable information.  George – the head writer at Washington’s Blog – is a busy professional and a former adjunct professor.



I heard a recent talk by Richard Wolff – Professor of Economics Emeritus at the University of Massachusetts in Amherst (PhD in Economics from Yale) – where Wolff said that 97% of all U.S. mortgages are either written or guaranteed by the government.

As Bloomberg explained last August:

Fannie Mae and Freddie Mac, the government-controlled companies that issued and guaranteed more than 71 percent of mortgage-backed bonds last year. Between those companies and Ginnie Mae, which guarantees loans insured by the Federal Housing Administration, the government backed nearly 97 percent of U.S. mortgages in 2009.

There are supposedly plans in Washington to wind down Fannie and Freddie. Critics say that would destroy the “recovery” in housing.

If continuing to throw money at Fannie and Freddie would stabilize the economy, I might be for it – even though it is not free market capitalism. I am not wed to either liberal or conservative ideologies, and am instead simply motivated to do whatever will work to stabilize the economy and help the most people.

But as I noted in January:

Most independent experts say that the government’s housing programs have been a failure. That’s too bad, given that the housing slump is now – according to Zillow’s – worse than during the Great Depression.

Indeed, PhD economists John Hussman and Dean Baker, fund manager and financial writer Barry Ritholtz and New York Times’ writer Gretchen Morgenson say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama’s foreclosure relief programs as being backdoor bailouts for the banks. (See this, this, this and this). Continue reading »

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Mar 05

Related info:

- $2 Trillion Debt Crisis Threatens to Bring Down 100 US Cities Next Year

- Meredith Whitney: US Government Will Have to Bailout States in Next 12 Months


Buyers of bonds issued by US states and local authorities are being ‘Pollyannaish’ in ignoring the state of their finances


Nouriel Roubini’s consulting firm predicts substantial, but not system-threatening, defaults in the US municipal bonds market. Photograph: Sony Pics/Everett/Rex Features

US states and local governments could default on $100bn (£60bn) of their debts over the next five years, according to a report from the consulting firm founded by economist Nouriel Roubini.

The report follows dire predictions of a wide-scale collapse in the US’s $2.7tn municipal bonds market by Meredith Whitney, the analyst who was among the first to warn of the 2008 banking crisis.

Roubini Global Economics’ forecast is less gloomy than Whitney’s, but it warns that investors are being “Pollyannaish” in dismissing the serious problems in the market.

“The municipal bond market has generated tremendous debate in the past months, with Cassandras predicting another ‘sub-prime’ disaster, while apologists (often with vested interests) claim there is little justification for these warnings,” write the authors of the Roubini report, David Nowakowski and Prajakta Bhide. They conclude that while investors do face $100bn in defaults, the problems will not prove “systemic in nature” and will not “infect the financial system, though they will dampen economic recovery.”

Continue reading »

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Feb 18


Prof. Nouriel Roubini

- Roubini’s Next Crisis Is Scary Food for Thought (Bloomberg):

Yet the economic consequences of food prices pale in comparison with the social ones. Nowhere could the fallout be greater than Asia, where a critical mass of those living on less than $2 a day reside. It might have major implications for Asia’s debt outlook. It may have even bigger ones for leaders hoping to keep the peace and avoid mass protests.

It’s not hyperbole when Nouriel Roubini, the New York University economist who predicted the U.S. financial crisis, says surging food and energy costs are stoking emerging-market inflation that’s serious enough to topple governments. Hosni Mubarak over in Egypt can attest to that.

Side Effects

It’s important to begin considering the side effects. The United Nations reckons countries spent at least $1 trillion on food imports in 2010, with the poorest paying as much as 20 percent more than in 2009. These increases are just getting started. In January, world food prices rose to another record on higher dairy, sugar and grain costs.

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Jan 28

Stewardship of the global economy is in disarray due to a vacuum of leadership, senior economists have warned.

Nouriel Roubini, professor of economics at New York University, and Sir Martin Sorrell, chief executive of the media group WPP, lamented a lack of joined-up global leadership, describing co-ordinated efforts to address trade imbalances, capital flows, water resources, immigration and climate change as “G Zero”.

“There is complete disagreement and disarray. That’s the sense of the G Zero,” Mr Roubini said, explaining the new buzzword at the World Economic Forum’s annual conference in the Swiss resort of Davos.

“There is no agreement on anything. We are in a world where there is no leadership,” he added.

Continue reading »

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Sep 05

Just that there never was a defense. This entire financial crisis has been engineered.

This will also not be a double-dip recession, but the Greatest Depression ever.


The United States, Japan and large parts of Europe have exhausted their policy arsenal, leaving them defenceless against a double-dip recession as recovery slows to ‘stall speed’.

Nouriel Roubini said the US growth rate was likely to fall below 1pc in the second half of the year
Nouriel Roubini said the US growth rate was likely to fall below 1pc in the second half of the year Photo: BLOOMBERG

“The US has run out of bullets,” said Nouriel Roubini, professor at New York University, and one of a caste of luminaries with grim forecasts at the annual Ambrosetti conference on Lake Como.

“More quantitative easing (bond purchases) by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5pc yet credit spreads are widening again. Monetary policy can boost liquidity but it can’t deal with solvency problems,” he told Europe’s policy elite.

Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5pc to zero, a budget deficit of 10pc of GDP, and $3 trillion to shore up the financial system.

The anaemic pace compares with rates of 4pc-6pc at this stage of recovery in normal post-war recoveries.

Continue reading »

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May 18

nouriel-roubini
Nouriel Roubini, professor at New York University’s Stern School of Business. (Bloomberg)

May 18 (Bloomberg) — The crisis engulfing the euro area is not over yet as Greece remains the “tip of an iceberg,” New York University professor Nouriel Roubini said.

“It’s not over,” Roubini said in an interview with BBC radio broadcast today. “What we’re facing right now in the eurozone is a second stage of a typical financial crisis.”

The European Union’s 750 billion-euro ($931 billion) rescue package to stop contagion from Greece hasn’t calmed the markets while questions remain about whether governments are strong enough to implement the austerity measures required, Roubini said. The European Union said today it has transferred the first instalment of emergency loans to Greece, one day before 8.5 billion euros of bonds come due. Continue reading »

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Apr 28

‘Spain is worse than Greece.’

nouriel-roubini-001
Prof. Nouriel Roubini

- Roubini on Greece (Reuters):

Meanwhile, Tony Barber has already come to the conclusion that as far as Greece is concerned, “the political conditions for extra financial help from Germany just do not exist”.

Nouriel, of course, takes that kind of thinking to its logical conclusion, and kicked off the panel by announcing that it was just in time: “in a few days,” he said, “there might not be a eurozone for us to discuss.” There’s no way that Greece can implement the 10% spending cut it needs to do in order to stop its debt spiralling out of control at current interest rates — and even if it did, the economic effects would be disastrous.

Nouriel’s base case, then, is Argentina 2001: after all, Greece has a much higher debt-to-GDP ratio, much higher deficit-to-GDP ratio, and much higher current-account deficit than Argentina had back then. And if that’s the base case, there’s no way that Greek debt should be trading anywhere near its current levels.

Of course, this being Nouriel, it goes downhill from there: if Greece is worse than Argentina, he says, then Spain is worse than Greece. Its housing bubble and bust has left the banking sector much weaker than Greece’s; its unemployment situation, especially with the under-30 crowd, is much worse than Greece’s; and the cost of any Spain bailout would be so much more enormous than the cost of a Greek bailout as to be almost unthinkable. The only thing that Spain has going for it is that it isn’t quite at the edge of the abyss yet; if it gets its political act together and implements tough fiscal and structural reforms now, it can save itself. But clearly no one saw that happening, given Spain’s political history over the past 20 years.

Apr 27, 2010 22:14 EDT

See also:

- Greece: Bondholders May Lose $265 Billion as S&P Sees 70% Loss (Bloomberg)

- Standard & Poor’s Downgrades Greece’s Credit Rating to Junk (Bloomberg)

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Jan 30

Related article:

- US: GDP Mirage – The Last Hurrah:

Digging beneath the surface there is nothing to cheer about in the GDP numbers. Moreover, this weakness is in the face of the largest stimulus measures the world has ever seen, not just in the US, but globally. Money supply in China is growing at 30% and housing bubbles are likely to pop in Australia, Canada, and the UK. Problems in Greece, Spain, and Iceland continue to mount.

GDP is a mirage of sand blowing in the wind. So is global growth. It is a mistake to believe government spending can possibly provide a solid foundation for a lasting recovery.


nouriel-roubini

Jan. 30 (Bloomberg) — New York University Professor Nouriel Roubini, who anticipated the financial crisis, called the fourth quarter surge in U.S. economic growth “very dismal and poor” because it relied on temporary factors.

Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.

“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”

Roubini said while the world’s largest economy won’t relapse into recession, unemployment will rise from the current 10 percent, posing social and political challenges. Continue reading »

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Nov 28

Update:

- Dubai World Unit Faces Default Test Monday With Bond Payment (Wall Street Journal):

DUBAI (Zawya Dow Jones)–Debt-laden Dubai World’s unit Jebel Ali Free Zone Authority, or Jafza, faces on Monday a coupon payment on a 7.5 billion U.A.E dirham ($2.04 billion) Islamic bond in the first key test of whether it will default.

- Abu Dhabi to aid Dubai “case by case”: official (Reuters):

ABU DHABI (Reuters) – Abu Dhabi, capital of the United Arab Emirates and one of the world’s top oil exporters, will “pick and choose” how to assist its debt-laden neighbor Dubai, a senior Abu Dhabi official said on Saturday.

“We will look at Dubai’s commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts,” the official told Reuters by telephone.

- Japanese banks’ exposure to Dubai at JPY100 bln -Nikkei (Reuters):

Nov 28 (Reuters) – Japanese financial institutions, including three major banks, face loan exposures of about 100 billion yen ($1.16 billion) in Dubai, the Nikkei business daily said.

- Dubai debt woes may hit U.S. property market (Reuters):

“This downturn has had more of a global impact,” said Tony Ciochetti, chairman of Massachusetts Institute of Technology’s Center for Real Estate in Cambridge, Massachusetts.

“Dubai may have to unload some very prestigious properties at distressed prices and this will drive the price of all commercial real estate lower,” wrote Richard Bove, a banking analyst at Rochdale Securities in Lutz, Florida.


the-atlantis-hotel-in-dubai
The Atlantis hotel in Dubai.

Dubai or not Dubai — that is the question. Dubai’s sorta-kinda default (a state-owned enterprise seeking a rescheduling of its debts) is, by itself, not that big of a deal. But who else looks like Dubai? What kind of omen is this for the next stage in the financial crisis?

As far as I can tell, there are three ways to look at it — three stories, if you like, about what Dubai means.

First, there’s the view that this is the beginning of many sovereign defaults, and that we’re now seeing the end of the ability of governments to use deficit spending to fight the slump. That’s the view being suggested, if I understand correctly, by the Roubini people and in a softer version by Gillian Tett.

Alternatively, you can see this as basically just another commercial real estate bust. Either you view Dubai World as nothing special, despite sovereign ownership, as Willem Buiter does; or you think of the emirate as a whole as, in effect, a highly leveraged CRE investor facing the same problems as many others in the same situation.

Finally, you can see Dubai as sui generis. And really, there has been nothing else quite like it.

At the moment, I’m leaning to a combination of two and three. For what it’s worth (not much), US bond prices are up right now, suggesting that the Dubai thing hasn’t raised expectations of default.

Continue reading »

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Aug 31

Nouriel Roubini also said in May 13, 2009:
“Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be only a matter of time.” Source: The New York Times


nouriel-roubini
Nouriel Roubini is a professor of economics at the Stern School of Business, New York University and chairman of RGE Monitor, an economic consultancy firm.

In a new essay in Forbes, Nouriel Roubini writes:

Net public debt is going to double as a share of GDP between 2008 and 2014. Even using the very optimistic forecasts of the Congressional Budget Office, which anticipate growth of around 4% over the next few years, the net debt burden will rise from 40% of GDP to 80%–that’s an increase in the debt stock of about $9 trillion. The interest charge alone on that increased debt will be in the region of $300 billion to $400 billion a year, which in turn may mean more borrowing to pay the interest if primary deficits are not reduced. When governments reach the point where they are borrowing to pay the interest on their borrowing they are coming dangerously close to running a sovereign Ponzi scheme.

Ponzi schemes have a way of ending unhappily…

Continue reading »

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May 15

The Chinese yuan is preparing to overtake the US dollar as the world’s reserve currency, economist Nouriel Roubini has warned.

Professor Roubini, of New York University’s Stern business school, believes that while such a major change is some way off, the Chinese government is laying the ground for the yuan’s ascendance.

Known as “Dr Doom” for his negative stance, Prof Roubini argues that China is better placed than the US to provide a reserve currency for the 21st century because it has a large current account surplus, focused government and few of the economic worries the US faces.

In a column in the New York Times, Prof Roubini warns that with the proposal for a new international reserve currency via the International Monetary Fund, Beijing has already begun to take steps to usurp the greenback.

Continue reading »

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Mar 26

Yes, this is a bear-market rally and it will end.



Nouriel Roubini, professor of economics at New York University, pauses during an interview in Hong Kong, on March 3, 2009. Photographer: Scott Eells/Bloomberg News

March 26 (Bloomberg) — U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

“The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”

The global equity rebound in March that sent the Standard & Poor’s 500 Index to its best monthly advance in 17 years is a “bear-market rally” and U.S. Treasury yields will “remain relatively low” as investors flock to the safest assets, Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said.

Continue reading »

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Feb 16

Roubini is definitely not the only one that has forecasted the crisis and many others offered better solutions, but the government ignored them, because their solutions have been quite the opposite of the catastrophic policies favored by the government . Soon it will not matter anymore what the government and the Fed are doing, because it is too late. So far the government and the Fed have turned a recession, that would have healed the economy, into the Greatest Depression.


Tim Geithner must nationalise some of America’s biggest banks and take the total toll of the US bail-out to around $2 trillion, according to one of the world’s most prominent economists.

Nouriel Roubini – the man feted with having foreseen the financial crisis before almost any of his peers – has warned that the US Treasury Secretary must go significantly further than his detail-light bail-out plan delivered last week, and argues that the Obama administration should move swiftly to take public ownership of those major US banks which are failing.

Professor Roubini, who worked with Mr Geithner in the Clinton administration, told The Daily Telegraph: “Many US banks are insolvent, even the major ones.” While nationalisation is “a politically- charged decision” which needs to handled carefully, he said it needs to take place “sooner rather than later” for the sake of the wider economy.

Professor Roubini calculated that, on top of the existing $700bn (£491bn) of American taxpayers’ money allocated to solving the banking crisis, Mr Geithner may need to ask the US Congress for between $1,000bn and $1,250bn in extra funds. “Sooner rather than later, they’ll need more money,” he added.

Prof Roubini, professor of economics and international business at NYU Stern, New York University’s business school, is highly critical of Mr Geithner’s bail-out plan, which he unveiled to much market chagrin last Tuesday.

Continue reading »

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Jan 23


Nouriel Roubini, professor of economics at New York University, speaks during a panel discussion at the annual meetings of the International Monetary Fund and the World Bank, in Washington, Sunday, Oct. 12, 2008. Photographer: Chris Kleponis/Bloomberg News

Jan. 23 (Bloomberg) — Stocks will retreat around the world because of shrinking demand from China as growth in the third- biggest economy slows, said Nouriel Roubini, the New York University professor who predicted last year’s financial crisis.

Global equities will fall 20 percent from current levels as China, which contributed 19.5 percent to total growth in 2007, contends with its slowest expansion in seven years, he said. Wall Street strategists predict the Standard & Poor’s 500 Index will rise 29 percent this year from the closing level yesterday.

Roubini, an economics professor at NYU’s Stern School of Business, said China already is in a “recession” despite government data showing a 6.8 percent fourth-quarter growth rate, as power output drops and manufacturing shrinks.

“Demand is falling in China, they’re over-invested in capacity and there’s a global supply glut,” Roubini, 50, said in a telephone interview. “It has very, very important implications.”

Roubini’s view is shared by Societe Generale SA global strategist Albert Edwards, who was correct in forecasting in March 2007 that a U.S. contraction would spur a bear market in equities. Edwards says the China slowdown will reduce earnings at industrial, energy and raw-materials companies, worsening a selloff in emerging and developed-market stocks that may send the S&P 500 down 40 percent to 500.

Continue reading »

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Jan 22

- Obama administration considers launch of ‘bad bank’ (Telegraph)

- US Initial Jobless Claims Match Highest Since ’82 (Bloomberg)

- Barack Obama inauguration: this Emperor has no clothes, it will all end in tears (Telegraph)

- Despite billions, banks still teeter on the brink (MSNBC)

- Microsoft to shed 5,000 jobs (Financial Times)

- Intel to Cut at Least 5000 Jobs (New York Times)

- GM Gets $5.4 Billion Loan Installment From Federal Government (CNNMoney)

- US jobless claims surge, housing start tumble (Forbes)

- Housing Starts, Permits in US Slump to Record Low (Bloomberg)

- Banks Foreclose on Builders With Perfect Records (New York Times)

- Jim Rogers: Now it’s time to emigrate, says investment guru (Independent)

- Saudi prince’s firm loses $8.3B in 4Q (AP)

- Investors flee after brutal losses at global markets (Emirates Business)

- Indians Flee Dubai as Dreams Crash – Fall out of Economic Crisis (Daijiworld):
It’s the great escape by Indians who’ve hit the dead-end in Dubai.

- China growth slows, Bank of Japan sees deflation (Forbes):
(Reuters) – China’s economy slowed sharply in the fourth quarter and Japan’s central bank on Thursday predicted two years of deflation as Asia’s largest economies buckle under the strain of the financial crisis.

- Roubini Sees China Recession Despite ‘Massaged’ GDP (Bloomberg)

- Asian economic woe grows as China slows and Japanese exports plunge (Telegraph):
China’s economy may have ground to a halt entirely between the third and fourth quarters of last year and Japanese exports plunged 35pc in December, underlining the scale of the slowdown in Asia.

- ZIMBABWE: Inflation at 6.5 quindecillion novemdecillion percent (IRIN)

- Sony forecasts $2.9bn operating loss (Financial Times)

- Hedge funds’ $400bn withdrawals hit (Financial Times)

- Google income drops 68% on one-time charges (IHT)

- Is Britain facing bankruptcy? (Guardian)

- Manufacturing outlook plummets (Financial Times)

- Car production plummets as pressure for industry bail-out grows (Telegraph)

- London’s Evening Standard sold to ex-KGB agent (Reuters)

- AIG starts $20bn auction of Asian unit (Financial Times):
AIG, the stricken insurance giant, on Wednesday kicked off the sale of its Asian life assurance unit – one of its most prized assets – in the hope of raising up to $20bn to help repay the $60bn US government loan that is keeping the group alive.

- UBS to Cut Securities Jobs, Close More Debt Units (Bloomberg)

- Japanese Housewives Desperate After Currency Scheme Collapses (Bloomberg)

- New age of rebellion and riot stalks Europe (Times Online)

- Increase in burglaries shows effect of recession (Guardian)

- Chinese media issues stinging attack on Barack Obama and George W Bush (Telegraph)

- Barclays may lose control to Gulf investors (Telegraph)

- Cars to be crushed in insurance crackdown (Scotsman)

- Investors say jailed pilot swiped money for years (Washington Post)

- Capital One Reports $1.42 Billion Loss on Charges (Bloomberg)

- Nokia reports sharp fall in profits (Financial Times)

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Jan 20

Roubini Predicts U.S. Losses May Reach $3.6 Trillion

Jan. 20 (Bloomberg) — U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.

‘Bankrupt’ System

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

Continue reading »

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Nov 28

Nov. 28 (Bloomberg) — Russia’s ruble headed for its biggest weekly decline against the euro in at least five years as the central bank let the currency depreciate and raised interest rates to halt an exodus of foreign capital.

Bank Rossii widened the ruble’s trading band for the second time this week by about 30 kopeks (1 U.S. cent), or 1 percent, on each side, according to Mikhail Galkin, head of fixed-income and credit research at MDM Bank in Moscow. The central bank said today it will raise its benchmark refinancing rate to 13 percent from 12 percent to help stem currency losses.

Russia is among a handful of countries raising interest rates after it drained $148 billion from the world’s third largest foreign-currency reserves since August to arrest a 16 percent currency slide against the dollar. BNP Paribas SA estimates that investors pulled $190 billion out of the country since August as oil prices fell below the $70-a-barrel average required to balance Russia’s budget in 2009.

Continue reading »

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Oct 26

When this man predicted a global financial crisis more than a year ago, people laughed. Not any more…

As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom.

For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis.

While the economic sun was shining, most other economists scoffed at Roubini and his predictions of imminent disaster. They dismissed his warnings that the sub-prime mortgage disaster would trigger a financial meltdown. They could not quite believe his view that the US mortgage giants Fannie Mae and Freddie Mac would collapse, and that the investment banks would be crushed as the world headed for a long recession.

Yet all these predictions and more came true. Few are laughing now.

What does Roubini think is going to happen next? Rather worryingly, in London last Thursday he predicted that hundreds of hedge funds will go bust and stock markets may soon have to shut – perhaps for as long as a week – in order to stem the panic selling now sweeping the world.

What happened? The next day trading was briefly stopped in New York and Moscow.

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Oct 26

Stock markets across the world cracked yesterday, forcing Wall Street to suspend trading on a key futures contract to stem panic-selling while Moscow shut for business altogether.

Sharp losses in New York, London, Europe and the Far East raised the spectre that governments may be forced to impose emergency holidays to avert a meltdown across world stock markets.

Before Wall Street opened yesterday, American regulators suspended all trading of Dow Jones futures contracts, which had plunged. Such contracts allow traders to bet on the future direction of the Dow Jones index. The plunge had triggered an automatic circuit breaker, which halts trading to prevent a market sliding into freefall.

Nouriel Roubini, Professor of Economics at New York University, said that his prediction earlier this week that markets would have to be shut down is already coming true.

He said: “This morning, even before the markets in the US opened, the S&P futures fell by more than their daily limit. What I said yesterday has already started.”

A forced closure of stock markets in America would respresent the first time that Washington would have shut Wall Street since the terrorist attacks of September 2001. It would also have echoes of the 1930s, when President Franklin D. Roosevelt shut American banks during an enforced holiday.

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Oct 24

Emmanuel Roman, the co-chief executive of Europe’s biggest hedge fund GLG, has warned that thousands of hedge funds are on the brink of failure as the global economy contracts with unexpected severity.

Emmanuel Roman, of GLG Partners, said 25pc-30pc of the world’s 8,000 hedge funds would disappear “in a Darwinian process”, either going bust or deciding meagre profits are not worth their efforts.

“This will go down in the history books as one of the greatest fiascos of banking in 100 years,” said Mr Roman, who with Noam Gottesman, co-runs GLG, a former division of Lehman Brothers Holdings with assets of $24bn (£14.8bn). “There need to be some scapegoats, and the regulators are going to go hunt people. That will be good in the long run.”

His views were echoed by Professor Nouriel Roubini, a former US Treasury and presidential adviser known for his accurate prediction of financial crises, who estimated that up to 500 hedge funds would fail within months.

Both men were speaking at the same hedge fund conference in London yesterday, and Prof Roubini said he would not be surprised if the US and other countries soon had to close their stock markets for more than a week to halt descent into “sheer panic”.

The economist warned that the world is heading for a protracted recession that will end the US’s financial dominance.

“It’s the beginning of the decline of the US financial empire. The Great Depression ended in a massive war. I hope that’s not going to happen but it’s pretty ugly now,” Prof Roubini said.

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Oct 24

Oct. 23 (Bloomberg) — Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.

“We’ve reached a situation of sheer panic,” Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. “There will be massive dumping of assets” and “hundreds of hedge funds are going to go bust,” he said.

Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.

“Systemic risk has become bigger and bigger,” Roubini said at the Hedge 2008 conference. “We’re seeing the beginning of a run on a big chunk of the hedge funds,” and “don’t be surprised if policy makers need to close down markets for a week or two in coming days,” he said.

Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a “catastrophic” financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a “sharp drop” in equities.

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Oct 14

Oct. 14 (Bloomberg) — Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, driving the stock market lower after it rallied the most in seven decades yesterday.

“There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. “We’re going to be surprised by the severity of the recession and the severity of the financial losses.”

The economist said the recession will last 18 to 24 months, pushing unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs.

``This will be the first round of recapitalization of the banks,” Roubini said. “The government has to decide to intervene much more directly in the provision of credit and the management of these companies.”

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Oct 12

The financial events of recent weeks have filled many of us with shock and panic. Surely no one could have predicted that we would be in this mess? Well, actually, they did. Here are ten people who saw the financial meltdown coming…

1. Vince Cable – deputy leader of the Liberal Democrats

Here is a question Mr Cable’s posed to Gordon Brown, then Chancellor, during Treasury Questions back in November 2003: “The growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level. What action will the Chancellor take on the problem of consumer debt?”

Mr Brown did not answer how he would solve the problem, merely replying that: “We have been right about the prospects for growth in the British economy, and the hon. Gentleman (Mr. Cable) has been wrong.”

2. Christopher Wood – chief strategist of CLSA, a broking firm in the Asia-Pacific Market.

In October 2005 Mr Wood wisely declared: “Investors should sell all exposure to the American mortgage securities market.” In an interview in 2007, he said: “Some institutions have been behaving like leveraged speculators rather than banks… The UK economy is heading for a sharp shock. It just remains to be seen how bad.”

3. Founders of www.stock-market-crash.net – website aimed at investors

The writers of this site claim that predicting crashes is, in fact, easy: “One of the greatest myths of all time is that market crashes are random, unpredictable events. The lead up to a market crash is often years in the making. Certain warning signs exist, which characterize the end of a bull market and the start of a bear market. By learning these common warning signs, you can liquidate your investments and prosper by shorting the market.”

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Oct 10

Stock markets across the world are in a state of hysteria. The tidal wave of sell-offs, which began when Henry Paulson announced the Bush administration’s $700 billion bailout plan for the sinking banking system, has swelled into a global tsunami racing round the globe.

Shares fell sharply across Europe and Asia for the fifth straight day following a 679 drop on the Dow Jones.  Nearly $900 billion was wiped off the value of U.S. equities in just one trading day. The Chicago Board Options Exchange Volatility Index, the “fear index”, soared to a record 64.

Credit markets remain frozen. Libor, the London interbank offered rate, nudged up slightly on Thursday night, signaling even greater resistance to lending between the banks. Until there is relief in the credit markets, stocks will continue to slide. But trust has vanished. The 50 basis points rate cut that was coordinated with foreign central banks has had no effect. The market is being driven by fear and pessimism.

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