Nouriel Roubini predicts a ‘perfect storm’ for 2013 but will it be earlier?
Posted on 13 June 2011 with 5 comments from readers
Dr Doom Nouriel Roubini, who correctly predicted the US subprime crisis in 2006 is making waves again by predicting a ‘perfect storm’ for the global economy in 2013.
ArabianMoney wonders if his analysis is correct but the date a little distant. Things may come to a head more quickly than that as they did between 2006 and 2007.
Political control?
2012 is a US presidential year but if politics could really control economics then we would be living in a land of perpetual riches with never a change of government. You could say the same about the World Cup in the UK next year.
Politicians surf on waves of public opinion and economic forces. They can do harm but seldom good, and can never command the tide to turn back. So what reasons would ArabianMoney have for seeing a perfect storm coming rather earlier than Dr Doom suggests?
It is really just a reading of global financial markets which seem to be falling apart after a very long rally. This partly predicts and will partly cause an economic downturn. There is a crisis brewing in China that is completely out of US hands (click here). Ditto Europe and the Middle East (click here).
High oil prices – up 50 per cent in six months – are an obvious catalyst for an immediate economic slump. It’s inflationary. It’s a cost against corporate profits. It’s a hit for consumption all over the world.
We also reckon that the world economy and global banking system is actually weaker for the three year slowdown since the financial crisis three years ago. It will be less able to deal with shocks. The strength of bank balance sheets is a mirage if you really strip out bad loans that are counted as assets.
Perfect storm
By a ‘perfect storm’ Dr Roubini presumably means some kind of repeat of the last crisis with a credit squeeze impacting on global trade and manufacturing as well as stocks and real estate.
The response to this deflationary shock would surely be an inflationary printing of money through quantitative easing again. The risk to paper money would then be even more obvious with an excess supply of money devaluing currencies against real assets.
The ArabianMoney theme is that for investors this means any new major crisis is a buying opportunity, provided of course that you are not wiped out in this storm, a strategy we take up far more fully in our investment newsletter (subscribe here).
5 Comments posted by readers:
i never tire of commending A$ (my logo!) as the best free broker of efficient information..all the while so kind, never a bad word for personalities..like Ian Fleming not publishing identities responsible for real social destruction..watch me reverse his point on political control – since politics can’t lead an economy, control of the body politic resides in the financial oligarchy, providing us an ecomomy of perpetual inequality & starvation with scarcely a regime change in sight..the oligrachs & bowing politicos use the same limo service & manicurist – voila..our editor at least peers behind the curtain at naked truth & circumstance..no reader of his rag lacks for warning or caution on the financial front..keep smiling, Peter – for all your civility, you are a beacon of bad times
While both experts like Roubini and lay-people in general sense that a “perfect storm” is brewing, many lay-people sense that it’s not as far off as 2013.
My “sense”, for whatever little it may be worth, is that, although the Power Elite are desperately trying to postpone this perfect storm until after the November 2012 elections, it’s likely that the dreaded event will occur PRIOR TO these elections. Perhaps by the spring of 2012, or maybe the summer of 2012.
Between now and summer of 2012, I sense a 15% stock market correction in the US and Euroland, followed by the “main event”, which will surely be ugly.
@ Tim McGee:
Well said!
Peter’s commentaries, coupled with the oft cogent remarks from regulars, result in high factual and usable “information content” . . . unlike many other financial blogs, which have a very low fact-to-crap ratio.
@ tim mckee</b?
“A$” as your logo? Surely AAu or AAg is more apposite?
US$ MELT DOWN, JUST WAIT, SAVE DINAR DIRHAM