China Will Feel The Effects Of A Slowdown In Europe, US

China, the world’s fastest-growing major economy, may face greater headwinds should there be weak growth in the United States and Europe.

in The Star, Malaysia

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If The Economic Data Surprise On The Down Side, We Are Going To Have A Correction Of The Stock Markets

"We are already in a situation which is going to feel like a recession, even if we are not in one. And if the economic data surprise on the down side, we are going to have a correction of the stock markets, widening of credit spreads, increased volatility, increase risk aversion, then it leads to a shock for the real economy."

in CNBC, September 27

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CNBC Video Interview: Global Economy Will Suffer More Financial Crises in Next 10 Years

The Main Scenario Is An Anemic Recovery, But I Don’t Rule Out That A Double-Dip Will Occur

We know the second half of the year is going to be worse than the first half of the year because of the tailwinds to growth from the fiscal stimulus turning into austerity. The main scenario is an anemic recovery, but I don’t rule out that a double-dip will occur in the US.

in Bloomberg.com

Oil Rise Is Benefiting The Mexican Peso

“Oil is rising, and that’s something that benefits the peso. The Fed’s move yesterday is weakening the dollar, and that is obviously being reflected in the peso.”

Bertrand Delgado, economist at Roubini Global Economics LLC, New York

in Bloomberg.com

The US Should Reduce The Payroll Tax For 2 Years

“A much better option is for the administration to reduce the payroll tax for two years. The reduced labor costs would lead employers to hire more; for employees, the increased take-home pay would boost much-needed economic consumption and advance the still-crucial process of deleveraging households (paying down credit card debt and other legacies of the easy-credit years).

Most policy approaches, including the Obama proposals, have tended to subsidize the demand for capital rather than the demand for labor. That has the problem backward. In the second quarter, capital spending reached an annual growth rate of 25 percent. The argument that increased demand for capital leads to greater demand for labor (i.e., if you buy more machines you need workers to run them) has not held up. Firms are investing in capital goods, equipment and offshore offices that allow them to produce the same amount of goods with less — and lower labor costs.

To avoid a chronic increase in the unemployment rate, we need to subsidize the demand for labor — achieving job creation — rather than making it cheaper to buy capital, as investment and other tax credits would do.

President Obama could fully fund the reduction in payroll tax by allowing the Bush tax cuts for people making more than 250,000 USD a year to expire. Meanwhile, the Bush-era cuts affecting middle- and low-income earners — the vast majority of Americans — would remain in place for the time being.

After two years, when U.S. growth is more robust and the pace of private-sector hiring has picked up, we can afford to phase out the payroll tax cut while maintaining the income tax rates for the rich.”

in The Washington Post

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The Fundamental Trends Might Lead To An Appreciation Of The Yen

“The size of intervention matters as well as coordination. In this case, the Bank of Japan went alone. Usually uncoordinated intervention is less effective than coordination.

The fundamental trends might lead to an appreciation of the yen further."

in Bloomberg.com

The Federal Reserve Will Move Into QE Too Little And Too Late

The Fed is not going to move next week. They’re going to move maybe in November because the latest data have been slightly better than expected. Eventually they’re going to get to QE but it’s going to be probably too little and too late.

in Bloomberg

CNBC Video Interview

Latest Nouriel Roubini video interview.

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We Already Have A Growth Recession

That's already a growth recession. The second half of the year is going to be worse than the first because all of the tailwinds to growth become headwinds.

in CNBC

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The Economy Is Going To Surprise On The Downside, The Stock Market Is Going To Correct

It will be a vicious circle because the economy is going to surprise to the downside.

The stock market is going to correct, credit spreads are going to widen. It will be a negative effect on consumption investment, the cost of capital is going to rise. And then you have another shock to the real economy, ending in a vicious cycle in which you can go off a cliff.

in CNBC.com

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Canada`s Economy Can`t Decouple From Its Main Trading Partner

“Economic growth in Canada will be, at best, close to potential for the next year, year and a half, where potential probably now is closer only to 2 percent. That growth could fall as low as 1.5 percent on a weaker-than- expected U.S. economy.

Canada’s economy is stronger than the U.S., but isn’t able to decouple from its main trading partner. For an economy that’s exporting about 70 percent of its exports to the United States and another 10 percent to the euro zone, the weakness in the United States implies that Canada cannot fully decouple from that economic weakness in the United States."

in a evening speech hosted by the C.D. Howe Institute in Toronto

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Obama Economic Proposals W ill Not Make a Difference

“All three proposals -- the R&D tax credit, investment tax credit and infrastructure -- make reasonable economic sense. However, the size of them is not large enough to make a difference for the economic outlook.”

in Bloomberg.com

ECB Should Consider Rate Cuts to Weaken Euro

New York University Professor Nouriel Roubini said the European Central Bank should consider cutting its benchmark interest rate in an effort to weaken the euro against the dollar.

Speaking at a conference in Cernobbio, Italy Roubini said that austerity measures being implemented to cut budget deficits in Europe are a “risk” to the region’s economic recovery.

The U.S. labor market remain ‘very weak’ even after jobs data today that was better than economists’s forecasts.

in Bloomberg

Related: CurrencyShares Euro Trust (FXE)

With Interbank Spreads Rising, You Can Get A Vicious Circle Like 2008-2009

The US has run out of bullets. More quantitative easing by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5 percent yet credit spreads are widening again. Monetary policy can boost liquidity but it can’t deal with solvency problems.

We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009.

There is a 40 percent chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it.

in the Ambrosetti Conference, Lake Como, Italy

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Consumption Is Weak, Exports Are Weak And Housing Is Weak

In the second half, fiscal policy becomes a headwind, no more cash for clunkers. The positive scenario is that growth will be below par.

The big risk is that there will be a downturn in markets that could impact the bond, the equity and the credit markets.

Job losses have been higher, the US jobs number will show that. There is no private sector jobs growth. Consumption is weak, exports are weak and housing is weak. If there is no final sales and no final demand, companies will not invest.

in CNBC

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The Stock Market Can Sharply Correct

With growth at a stall speed of 1 percent or below, the stock markets could sharply correct, and credit spreads and interbank spreads widen while global risk aversion sharply increases.

in Bloomberg

Related stocks: Bank of America Corporation (BAC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) , Wells Fargo & Company (WFC), HSBC Holdings plc (ADR) (HBC) , Barclays PLC (ADR) (BCS), Royal Bank of Scotland Group plc (ADR) (RBS), Banco Santander, S.A. (ADR) (STD), National Bank of Greece (ADR) (NBG)

Third Quarter Growth Will Likely Be Close To Zero

"Q3 GDP growth very likely to be below 1 percent; and likely to be closer to 0% than to a pathetically lousy 1 percent. So double dip risk is now over 40 percent"

in Washington Post

Related ETFs: ProShares UltraShort S&P500 (ETF) (SDS), SPDR S&P 500 ETF (SPY) , SPDR Dow Jones Industrial Average ETF (DIA) , iShares Russell 2000 Index (ETF) (IWM)