Roubini Acknowledges Upward Trending Employment

Roubini Global tweets:

We must operate with the facts in front of us, and they are that employment data is trending upwards.

He had no clue in early December, when he tweeted these Keynesian choices:

Post-thanksgiving slump or more ominous contraction?

The Economy Turns

James E. Miller emails and writes:

Looks like you nailed it.

He includes a link to a Bloomberg story which says:

Federal Reserve Chairman Ben S. Bernanke finally may be catching a break: His easy-money policies are showing signs of speeding up the economic rebound...

Housing may be nearing a bottom as record-low mortgage rates tempt more buyers into the market and confidence among homebuilders climbs to the highest since May 2010. Autos, another part of the economy sensitive to interest rates, are reviving, with carmakers reporting in November their highest sales pace in more than two years.

Banks also are starting to put more of their money to work, expanding commercial and industrial loans last quarter by the most since Lehman Brothers Holdings Inc. went bankrupt in September 2008.

What these Keynes economists still don't realize is that the price inflation is about to get fierce. The turning manipulated economy is too obvious to ignore at this point, even by guys who have bad (Keynesian) economic models. I expect Nouriel Roubini and even Paul Krugman to crack soon and admit the economy is turning. And don't (hee hee) expect Krugman to mention deflation in his start of the year forecasts.

Even Nouriel Roubini Gets What the ECB is Up To

He tweets:

ECB starts effective QE and stealth debt monetization: a backdoor SMP

Of course, EPJ had it figured out weeks ago, when it was announced.

Only Krugman remains mystified.

More Proof of Economic Madness in China: China Public Debt is 80% of GDP, Not Official 17%

The very tied in Nouriel Roubini tweets:

RGE estimate of China public debt is 80% of GDP. Official # = 17%

Here's the latest via Bloomberg on the insanity going on in China:

A copy of Manhattan, complete with Rockefeller and Lincoln centers and what passes for the Hudson River, is under construction an hour’s train ride from Beijing. And like New York City in the 1970s, it may need a bailout.

Debt accumulated by companies financing local governments such as Tianjin, home to the New York lookalike project, is rising, a survey of Chinese-language bond prospectuses issued this year indicates. It also suggests the total owed by all such entities likely dwarfs the count by China’s national auditor and figures disclosed by banks.

Bloomberg News tallied the debt disclosed by all 231 local government financing companies that sold bonds, notes or commercial paper through Dec. 10 this year. The total amounted to 3.96 trillion yuan ($622 billion), mostly in bank loans, more than the current size of the European bailout fund.

There are 6,576 of such entities across China, according to a June count by the National Audit Office, which put their total debt at 4.97 trillion yuan. That means the 231 borrowers studied by Bloomberg have alone amassed more than three-quarters of the overall debt...

Fraser Howie, the Singapore-based managing director of CLSA Asia-Pacific Markets who has written two books on China’s financial system.

“You should be more worried than you think,” he said of Bloomberg’s findings. “Certainly more worried than the banks will tell you.

“You know how this story ends -- badly,” he said.

The centrally planned manipulation of the Chinese economy, including massive amounts of money printing, could result in the greatest economic crash of all time.

Roubini Categorizes the Eurozone Countries: From Paradise to Hell

Nouriel Roubini is terrible in economic theory and doesn't have a clue about gold, but he is as tied in as an economist can get with the power elite. So when it comes to economics/politics, Roubini is worthwhile paying attention to. Below is Roubini's take on the EZ countries and their current relative financial strength. There is nothing earth shattering here, but it is the first time I have seen them all categorized.

EZ: Hard Core (Germany, Netherlands, Finland, Luxembourg, Slovenia,..), Soft Core (France, Belgium, Austria) & PIIGS (Greece, Ireland, Portugal, Italy, Spain, Cyprus).Or Paradise / Purgatory / Hell

Roubini's Goes Off on Gold with NYC Taxi Driver Ignorance about Money

Nouriel Roubini tweets:

Spam is a better hedge against inflation than gold: you can eat it and it lasts 1000 years. Gold is, as Keynes aptly said, a barbarous relic.

What's this nonsense about spam all about?

Roubini has gone from superior data hound to mouthing off the same analysis as a NYC cabbie who has no clue about money as a medium of exchange.

Click here to understand the mentality.

Greece, Again

It’s not just the Greek banks that have been spooked by National Bank of Greece’s cash call and attendant fears of government debt restructuring, reports FT.


French banks Société Générale and Credit Agricole, which have large holdings of Greek government debt and/or Greek banking businesses, are under pressure on Wednesday morning.

Nouriel Roubini, correctly, continues to call for an orderly Greek debt restructuring:

It is time to recognize that Greece is not suffering only from a liquidity crisis ­— it is also facing an insolvency crisis — thus an orderly restructuring of Greece’s public debt, rather than an EU/IMF bailout that only delays such restructuring and risk making it disorderly, is the appropriate policy response now.

Nouriel Roubini Tells a Russian Joke

Robini writes:

A UK PM asked Gorbachev to rate its economy in 1 word. The answer was: Good. Then he asked to describe it in 2 words. The answer: Not Good

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

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, according to Bloomberg.

“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 yesterday. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.’”

Roubini: Lauds Austrian Economics; Hangs with Soros

Nouriel Roubini continues to be one of the most fascinating economists operating today. His new book is just out, Crisis Economics: A Crash Course in the Future of Finance. I haven't had a chance to read the book yet, but I did skim through it this afternoon at a Borders Books.

During my quick skim , I found that Roubini treats the Austrian School of economics with respect, something which is obviously not the norm among the Keynesian crowd. He correctly notes in the book that the anti-regulation conclusions of the Austrian school almost force an Austrian economist  to  be a libertarian. He also correctly understands that the Austrians are against, from a policy perspective point of view, central banks printing money in the first place and that Austrians are against printing money as a solution to the downturn.

Two areas I would disagree with Roubini on in his Austrian analysis  are his view of Joseph Schumpeter as the important figure in Austrian economics, and also Roubini's view that the fall off in aggregate demand during the crisis phase of the business cycle can not be solved by the Austrian prescription of allowing the malinvestments to liquidate.

Curiously, both these problems with Roubini's view  were actually key areas of specialty by two Austrian Economics professors who taught at one time at New York University, where Roubini currently teaches. Unfortunately for Roubini, he teaches in the Stern graduate business school , whereas Israel Kirzner and Fritz Machlup taught in another era and in the graduate School of Arts and Sciences.

Kirzner advanced the role of the entrepreneur, from an Austrian perspective, in a much more rigorous fashion than Schumpeter. And he highlighted much more important roles that the entrepreneur plays, than Schumpeter did with his "creative destruction" entrepreneur. Roubini needs to read Kirzner's Competition and Entrepreneurship, pronto.

Further, Roubini calls the debates between Schumpeter and Keynes as most important.  I certainly differ with this view. The debates between Austrian economist Fredrich Hayek and Keynes were much more important, as they directly concerned the nature and policies of the business cycle.

Roubini also argues that in the short term the Austrian solution of just allowing the economy to correct itself during a downturn in the business cycle can not work because of the fall in aggregate demand, what I would call the extreme desire to hold cash. Machlup answered Roubini's concerns regarding this very point in a May 1937 paper, Can We Control the Boom?

Aside from Roubini's concerns regarding short-term aggregate demand problems and Austrian solutions, he writes that in the medium-term and the long-term Austrian economics has "something to teach us."

I certainly can't argue with that assessment, although I think he may misunderstand a bit that Austrians aren't anti-debt, but rather any economic misdirection caused by central bank money printing,

Roubini also says that it is a shame that those who follow Keynes, and those who follow Schumpeter, don't  talk to each. This is true, but representing the Austrians, here he should have listed Mises, Hayek and Rothbard. All three have followers in the modern  dayAustrian camps, whereas there are none that I am aware of that would consider themselves as followers of Schumpeter.

The other part of Roubini's book that caught my eye was his hefty acknowledgements where at one point he thanks George Soros for allowing him to use Soros' summer house for writing part of the book.  Now, I know some will immediately jump at this and charge that Roubini is simply a Soros tool. I don't see it that way. Roubini as I have written before is the most  connected economist alive today. He's a skilled operator who knows how to work the global inner elite, Soros et al. Soros has his tools, but Roubini is his own man.

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.

Roubini: Greece 'Nearly Insolvent,' Bailout Won't Work

Nouriel Roubini is not buying the EU/IMF patch job as the solution

Europe's current bailout plan for Greece "is not going to work" because "Greece is nearly insolvent," Roubini told CNBC Wednesday.

"A restructuring of its debt [i.e. default] is going to be necessary," said Roubini.

A collapse of the Greek economy could have domino effect among other weak eurozone countries—including Portugal, Spain, Italy and Ireland, he said.

“Suppose you have a disorderly collapse of Greece, two things will happen," he added. "Financial institutions holding Greek debt—mostly European—will have massive losses. Secondly, a contagion from Greece to Portugal to Spain to Italy to Ireland will have a domino effect."

Eventually, debt increases and risk aversion is going to drive down the asset prices globally, as it happened yesterday and today.”

Roubini: EuroZone May Be Only Days Away from Crack Up

Nouriel Roubini is at the Milken Conference and Felix Salomon reports in on Roubini's panel comments:

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 spiraling 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.

Monitoring the Milken Institute Global Conference

Alan Prest of PEU Report emails:
 
Bob,

I ran across the speaker list for next week's Milken Institute Global Conference "Shaping the Future." 

You'll recognize many names, including:

Austin Beutner, City of Los Angeles
Leon Black, Apollo Management
David Bonderman, TPG Capital & GM Board of Directors
H. Rodgin Cohen
Robert Dove, Carlyle Group Managing Director, focus infrastructure
Numerous Goldman Sachs people
Nouriel Roubini
Meredith Whitney

There are lots of private equity, pension fund, and politicians (US & international)..  The media reps include John Carney, David Gregory & Andrew Ross Sorkin.