The Vicious Circle To Depression

Vicious circle to depression: firms cut jobs as there are not enough sales; but cutting jobs destroys labor income and leads to lower sales. - in TW

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Nonsense of the Year: "The Obama Stimulus Had No Effect"

Myth / Nonsense of the Year: "The Obama stimulus had no effect".

Rather it prevented the Great Recession from turning into Great Depression 2.0. - in Nouriel`s Official Twitter

We Have Manic Depressive Markets

Manic depressive markets are in risk-off & risk-on mode. Today risk-off. In next few months mostly risk-off as the double dips materializes. - in NR`s Official Twitter

Topics: SPDR Gold ETF (GLD), SPDR S&P 500 Index ETF (SPY), iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX), United States Oil Fund LP (ETF) (NYSE:USO)

The Difference Between A Double Dip And A Depression

What's the difference between a Double Dip and a Depression? A hole so deep you cant dig yourself out of it. - in Roubini`s Official Twitter

Officials have run out of rabbits.

he massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anemic and sub-par in most advanced economies given painful deleveraging.

Now a combination of high oil and commodity prices, turmoil in the Middle East, Japan’s earthquake and tsunami, eurozone debt crises, and America’s fiscal problems (and now its rating downgrade) have led to a massive increase in risk aversion. Economically, the United States, the eurozone, the United Kingdom, and Japan are all idling. Even fast-growing emerging markets (China, emerging Asia, and Latin America), and export-oriented economies that rely on these markets (Germany and resource-rich Australia), are experiencing sharp slowdowns.

Until last year, policymakers could always produce a new rabbit from their hat to reflate asset prices and trigger economic recovery. Fiscal stimulus, near-zero interest rates, two rounds of “quantitative easing,” ring-fencing of bad debt, and trillions of dollars in bailouts and liquidity provision for banks and financial institutions: officials tried them all. Now they have run out of rabbits. - in Project-Syndicate

MerOzy: No Euro Bonds For Now

MerkOzy rule out E-bonds "for now". That leaves the option open when market pressure & EFSF maxing out puts mores pressure on italian and spanish spreads. - in Nouriel`s Twitter

We Are Not Going Back To The Gold Standard Any Time Soon

"40 years ago the Bretton Woods regime collapsed and the US went formally off gold. And we will not go back to a gold standard any time soon." - in NR`s Twitter

Related: SPDR Gold ETF (GLD), Newmont Mining (NEM), Novagold (NG), Barrick Gold (ABX), Goldcorp (GG)

Eurozone At Stall Speed

Eurozone at stall speed: Second quarter growth at 0.2 percent (0.8 percent annualized). Germany even worse at 0.1 percent. Third quarter looks worse given more tail risks in July /August. - in Roubini`s Official Twitter

I Think There Is A Risk That This Is The Second Leg Of What Happened During The Great Depression

We’re not there yet but I think there is a risk that this is the second leg of what happened during the Great Depression. We had a severe economic and financial crisis, then we kicked the can down the road and have too much private debt—households, banks, governments.

You cannot solve the problem with liquidity. At some point where there is too much debt either you grow your way out of...either you save yourself out of it...or you can inflate your way out of the debt problem, but that has a lot of collateral damage.

“We’re not doing it. We’re creating zombie households, zombie banks and zombie governments, and you can have a depression. - in CNBC

Karl Marx Said It Right. At Some Point Capitalism Can Self-Destruct Itself.

Karl Marx said it right. At some point capitalism can self-destruct itself because you cannot keep on shifting income from labor to capital without having excess capacity and a lack of aggregate demand. That’s what’s happening. We thought the markets work. They’re not working. - in CNBC

This Is Not The Time To Be In Risky Assets

“We don’t know whether this volatility is temporary and things are going to improve or whether there’s going to be a nasty recession and another 30-40% fall in equity prices. So until the fog of uncertainty is resolved, my view is that it’s better to be safe rather than sorry. This is not the time to be in risky assets.” - in The Big Interview

Taxes For The Rich

Each time I argue higher taxes for rich an idiot replies: "Why dont you send a check to the IRS?" Can`t reduce deficit alone; gotta rise taxes. - in Nouriel`s Official Twitter

Most Advanced Economies Are On The Verge Of A Double-Dip Recession

The recent massive volatility in global financial markets and sharp equity market correction—bordering on a bear market in some countries—signal that most advanced economies are on the verge of a double-dip recession. - in RGE.com

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This Is Not The Time To Be In Risky Assets

The Big Interview: Economist Nouriel Roubini says the risk of a global recession is greater than 50 percent, and the next two to three months will reveal the economy’s direction. In an interview with WSJ’s Simon Constable, Roubini also says he’s putting his money in cash. “This is not the time to be in risky assets,” he says.

Related: SPDR S&P 500 ETF (NYSE:SPY) ProShares UltraShort S&P500 (ETF) (NYSE:SDS) ProShares UltraShort QQQ (ETF) (NYSE:QID) iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM), United States Oil Fund (USO)

The Consequences Of Rising Income & Wealth Inequality

Consequence of rising income/wealth inequality: riots in Middle East, Israel, UK & popular anger in China. Will they start in the US too? - in Nouriel`s Official Twitter

ECB Should Slash Interest Rates to Zero

The European Central Bank should reduce rates to zero, and make big purchases of government bonds. - in FT.com

Manic Markets

Manic Markets: one second is "Fed is not doing enough" & markets sharply down; next sec is "the Fed will rescue us" & markets sharply up - in NR`s Official Twitter

Economic Policy: We Have Run Out Of Rabbits To Pull Out Of Hats

Until last year, policymakers could always produce a new rabbit from their hat to trigger asset reflation and economic recovery. Zero policy rates, QE1, QE2, credit easing, fiscal stimulus, ring-fencing, liquidity provision to the tune of trillions of dollars and bailing out banks and financial institutions - all have been tried. But now we have run out of rabbits to pull out of hats. - in FT.com

Treasuries Moved Up After The Downgrade

In Friday Bloomberg interview I argued that Treasury yields would go DOWN not up following the S&P downgrade. Case closed.

Related ETFs: ProShares UltraShort 20+ Year Trea (ETF) (NYSE:TBT) iShares Barclays 20+ Yr Treas.Bond (ETF) (NYSE:TLT), iShares Lehman 7-10 Yr Treas. Bond (ETF) (NYSE:IEF)

QE3 Won't Make A Difference

"QE3 won't make a difference." - in Bloomberg TV

S&P Downgraded The Fed, Should Downgrade The ECB To Junk

Since S&P downgraded the Fed that is now holding AA+ Treasuries it should downgrade the ECB to junk as it holds lotsa BBB to CCC PIIGS debt. - in Nouriel`s Official Twitter

Definition Of Crisis

Definition of "crisis": when officials need to huddle up on a weekend before Asia opening to take decisions and do statements as turmoil rages. - in NR`s Official Twitter

Until Now, We Have Back-Stopped The States Through The Federal Budget To Make Sure That They Don’t Blow Up

“Until now, we have back-stopped the states through the federal budget – transfer payments of a variety of sorts to make sure that they don’t blow up. At this point, the political willingness to do more of it is limited.” - in Forbes

Bloomberg Video: U.S. May Face Recession

Latest Bloomberg video interview - Watch here

Aug. 5 (Bloomberg) -- Nouriel Roubini, a New York University professor and the economist who predicted the global financial crisis, talks about the possibility of a U.S. recession. Roubini, speaking from Grand Lake Stream, Maine, with Michael McKee and Betty Liu on Bloomberg Television's "In the Loop," also discusses quantitative easing by the Federal Reserve and the July jobs report released today. (Source: Bloomberg)

QE1, QE2 And QE3

QE1 was mostly agencies — Fannie and Freddie, QE2 was treasuries mostly. QE3 could be state and local debt.” - in Forbes Blog

Lousy Job Report

Lousy job report: payrolls gotta rise by >150k to prevent unemp rate from rising: it fell to 9.1% only because 200K folks left labor force - in NR`s Official Twitter

There Is 70% Chance Of Italy Seeking Aid

"According to Nouriel Roubini, there is 70% chance of Italy seeking aid. (La Repubblica)" - in Proactive Investors UK

Related investment vehicles: iShares MSCI Italy Index (ETF) (NYSE:EWI) , iShares MSCI Spain Index (ETF) (NYSE:EWP)

QE3 Started In Japan & Switzerland

QE3 started in Japan & Switzerland via fx action &/or monetary easing. Fed will eventually get to QE3 but it will be too little too late. - in NR`s Official Twitter

Related: iShares MSCI Japan Index (ETF) (NYSE:EWJ), iShares MSCI Switzerland Index Fund(ETF) (NYSE:EWL)

The ECB Should Be Cutting Rates

The ECB not should not just hold rates; it should lower them to save Italy, Spain and stop the deepening recession in the periphery of the Eurozone. RGE's long-standing view that Spain and Italy had a high probability of losing market access is on the verge of materializing. - in NR`s Official Twitter Account

Related investment vehicles: iShares MSCI Italy Index (ETF) (NYSE:EWI) , iShares MSCI Spain Index (ETF) (NYSE:EWP)

Bad Economic Data, Eurozone Crisis. No Wonder Markets Are Free Falling.

Lousy GDP, depressed housing, plunging ISM, falling consumption, job losses, fiscal drag, Eurozone crisis. No wonder now markets are free falling. - in Nouriel`s Twitter

Related ETF s: SPDR S&P 500 ETF (NYSE:SPY) ProShares UltraShort S&P500 (ETF) (NYSE:SDS) ProShares UltraShort QQQ (ETF) (NYSE:QID) iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM)

G3 Economies Are Running Out Of Policy Bullets

G3 economies are running out of policy bullets: fiscal drag, inability to bailout banks by distressed sovereigns, limited effects of more QE.

Double-Dip Risk At 30 Percent

US economy close to stall speed and pig-headed front-loaded fiscal austerity making growth even worse and raising double-dip risk to 30 percent.

Related ETF s: SPDR S&P 500 ETF (NYSE:SPY) ProShares UltraShort S&P500 (ETF) (NYSE:SDS) ProShares UltraShort QQQ (ETF) (NYSE:QID) iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM)

Over-Investment In China

China train crash is signal of the excesses of over-investment: 10 thousand miles of high speed trains planned by an insolvent Railway Ministry - in Nouriel`s Twitter

Tickers: iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI)

We Have Dual Speed Growth In Australia

Dual speed growth in Australia where resource sectors & regions are booming while retail/housing is weak. - In NR`s Twitter

Related: iShares MSCI Australia Index Fund (ETF) (EWA)

This Isn`t A Soft Patch

Stall speed in the economy: Q2 growth down to 1.3 percent and Q1 growth revised to 0.4 percent. And Q3 starting on weak note. This isn't a soft patch. - in Nouriel`s Twitter

Related: SPDR S&P 500 ETF (SPY), ProShares UltraShort S&P500 ETF (SDS), ProShares UltraShort QQQ (ETF) (QID), SPDR Dow Jones Industrial Average ETF (DIA), iShares Russell 2000 Index ETF (IWM), iShares Barclays 20+ Year Treasury Bond ETF (TLT), ProShares UltraShort 20+ Year Treasuries ETF (TBT), ProShares UltraShort 7-10 Year Treasuries ETF (PST), United States Oil Fund LP ETF (USO)

The Bond Market Beauty Contest

Bond market is a beauty contest about the least ugly:CDS spreads surging in Italy/Spain while debt ceiling saga isn't hurting US Treasuries. - in Nouriel`s Twitter

Related: Banco Santander (STD), Banco Bilbao Vizcaya Argentaria SA (ADR) (Public, NYSE:BBVA), UniCredit SpA (BIT:UCG), Intesa Sanpaolo SpA (BIT:ISP), Banca Monte dei Paschi di Siena SpA (BIT:BMPS), ProShares UltraShort 20+ Year Trea (ETF) (NYSE:TBT), iShares Barclays 20+ Yr Treas.Bond (ETF) (NYSE:TLT)

Republicans Pretend To Be Born-Again Debt Virgins When They Fed The Beast

Reagan raised the debt ceiling 18 times, Bush 7 times by 4 trillion dollars. Now Republicans pretend to be born-again debt virgins when they fed the beast. - in Nouriel`s Twitter

I See The Chances That Greece Or Portugal Will Leave The Euro Zone At 30 Percent

In a few years the current rescue plan for Portugal will break down. The same holds for Ireland.

Euro-zone politicians may muddle through for another five years, but ultimately they will face very touch decisions. I see the chances that Greece or Portugal will leave the euro zone at 30 percent. - in Die Zeit, german newspaper

Related Tickers: Bank of Ireland (ADR) (NYSE:IRE) Allied Irish Banks, plc. (ADR) (NYSE:AIB) Banco Santander, S.A. (ADR) (NYSE:STD) Barclays PLC (ADR) (NYSE:BCS) Lloyds TSB Group plc (ADR) (NYSE:LYG) Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) HSBC Holdings plc (ADR) (NYSE:HBC)

Asian Financial Centers

Shanghai is still a long way in rivaling Hong Kong and Singapore as major financial center. - in Nouriel`s Twitter

Tickers: iShares MSCI Singapore Index Fund (ETF) (EWS), iShares MSCI Hong Kong Index Fund (ETF) (EWH), iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI)

The Problem Of Sovereign Risk Will Be A Serious One For Many Advanced Economies

The recovery has been so weak because this was not a traditional recession, but was a recession caused by a financial crisis brought on by too much debt and leverage first in the private sector and now in the public sector.

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The problem of sovereign risk will be a serious one for many advanced economies for many years to come. - in MarketWatch.com

I Don't Think The U.S. Will Default

There are about eight days until the deadline. My baseline scenario is still an agreement will be reached. I don't think the U.S. will default. - in a Shanghai Conference

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Raise The Ceiling!

Almost no democracy has a debt ceiling. This US farce is nonsense. A decade of bipartisan deficits and tax cuts led us here. Raise the ceiling! - in Nouriel`s Twitter

Tickers: ProShares UltraShort S&P500 (ETF) (SDS), SPDR S&P 500 ETF (SPY), iShares Russell 2000 Index (ETF) (IWM), ProShares UltraShort QQQ (ETF) (QID), SPDR Dow Jones Industrial Average ETF (DIA), iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX), iShares MSCI Emerging Markets Indx (ETF) (EEM)

Any Deficit Reduction Requires Tax Hikes

Federal taxes were 20 percent of GDP at time of a balanced budget. Now down to 14 percent the lowest in 60 years. So any deficit reduction requires tax hikes. - in Nouriel`s Twitter

China’s Economy Is Overheating Now But Over Time Its Current Overinvestment Will Prove Deflationary Both Domestically And Globally

I recently took two trips to China just as the government launched its 12th Five-Year Plan to rebalance the country’s long-term growth model. My visits deepened my view that there is a potentially destabilizing contradiction between China’s short- and medium-term economic performance.

China’s economy is overheating now, but, over time, its current overinvestment will prove deflationary both domestically and globally. Once increasing fixed investment becomes impossible – most likely after 2013 – China is poised for a sharp slowdown. Instead of focusing on securing a soft landing today, Chinese policymakers should be worrying about the brick wall that economic growth may hit in the second half of the quinquennium. - in Project Syndicate

Related: China Mobile (CHL), Aluminum Crop Of China (ACH), China Life Insurance (LFC), iShares FTSE/Xinhua China 25 Index (ETF) (NYSE:FXI), iShares MSCI Emerging Markets Indx (ETF) (NYSE:EEM)

The Biggest Challenges Advanced Economies Will Be Facing

"So the problems of sovereign risk, of reducing budget deficits and of stabilizing public debt are not just challenges for the eurozone periphery; they will be the biggest challenges advanced economies will be facing." - in MSNBC.com

Related Tickers: ProShares UltraShort S&P500 (ETF) (SDS), SPDR S&P 500 ETF (SPY), iShares Russell 2000 Index (ETF) (IWM), ProShares UltraShort QQQ (ETF) (QID), SPDR Dow Jones Industrial Average ETF (DIA), iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX), iShares MSCI Emerging Markets Indx (ETF) (EEM)

The Housing Market

The housing "spring season" ended into a worsening depression: existing home sales collapsing, cancellations surging, prices falling faster. - in Nouriel`s Twitter

Related: Lennar (LEN), KB Home (KBH), Toll Brothers (TOL), DR Horton (DHI)

The Eurozone Needs Policies To Restart Economic To Restart Economic Growth On Its Periphery.

"Finally, the eurozone needs policies to restart economic growth on its periphery. Without growth, any austerity and reform will deliver only social unrest and the constant threat of a political backlash, without restoring debt sustainability. To revive growth, the ECB needs to stop raising interest rates and reverse course. The eurozone should also pursue a policy – partially via looser monetary policy – that weakens the value of the euro significantly and restores the periphery’s competitiveness. And Germany should delay its austerity plan, as the last thing that the eurozone needs is a massive fiscal drag." - in Project Syndicate