Thursday, May 13, 2010

Roubini: The Bond Vigilantes Are on Their Horses Headed for the U.S.

Nouriel Roubini told FOX Business Network’s Neil Cavuto that:
....what is happening in Greece is just the tip of an iceberg. With private debt in many parts of the world, we socialize these private losses. Now with large budget deficits in Europe, in Japan, in the United States. The bond market vigilantes have woken up in Greece, in Portugal, in Spain.

At some point they're going to wake up in the U.K., in Japan, in the United States...

In a country like the U.S. where you can monetize the budget deficit, run the printing presses, monetizing the fiscal deficit eventually leads to inflation. So we're not going to have a default in the United States, that is not the option on the table. But we could have high inflation if we don't fix our fiscal problems
Clearly, Roubini understands the problem:
You have a federal deficit problem. A state and local problem. You have unfunded liabilities of Medicare, Social Security. And you have also unfunded liabilities of state and local government pension funds. You add it all together between the official debt, the implicit one, the bill is huge.
But his solution is only half right:
The official numbers suggest about $9 trillion budget deficits for the next decade. Even with reasonable assumption about economic growth, at some point we have to reduce spending, we have also raise some kind of non-distortional revenues
The reduction in spending is the correct part. What's his "non-distortional revenue" idea? A VAT tax.

In other words, Roubini is a good data man and understands the debt problems ahead, but doesn't get government. If he thinks that instituting a Value Added Tax in the U.S. is going to eliminate the deficit, and not result in Congress simply raising spending to match the new revenue stream, well then I have a some fog in San Francisco I would like to sell him.

Even in realeconomik terms the VAT is a bad idea.


  1. Nicholas J. KasterMay 13, 2010 at 10:07 PM

    The VAT hasn't saved Greece.

  2. Roiubini and Nassim Taleb are water carriers for George Soros who is pushing for a VAT to promote Soros' own perverse vision of social order. Soros loves to profit on the misfortunes of others, yet claims to advance a fairer society.

    Soros has been predicting a collapse of the Euro, as he predicted the collapse of the fixed exchange rate for Sterling in 1992 and the collapse of the Thai Baht and Malaysian Ringgit in 1997-1998. Roubini plays tennis with Soros and assits Soros in creating panics in world markets so that the great speculator can profit handsomely.

    Is a coincidence that the water carrier of the infamous George Soros, Nouriel Roubini, was the featured interview in the last weekend edition of the Financial Times? The chatter in London is that Soros and his cohorts, including his hedge funds and allied hedge funds and Goldman’s London office, are behind the recent collapse of the Euro. Soros and his kind know that Germany wants a Euro valued at $1.15 to $1.25 to fuel it export driven economy just like China undervalues its currency for domestic political and economic gain. Read the London press for some info on the man who broke the bank of England and has bragged about his dastardly deed. Read:

  3. To Anon #1:

    Maybe, I wrong, but I don't see Taleb as a water carrier for anybody but himself.

    Any interview I've seen or book I've read, the impression I get is that he's an esoteric guy that is very disaffected with the economics and finance establishment.