We Are On The Edge of Something Really Bad: Roubini Warns of New Bubble, Bigger Than ’06, Citi Warns Of Italian Rebellion Could Be Contagious, Ron Paul Warns of Imminent Dollar Collapse, And China Ratings Firm Warns Of Global ‘Currency Crisis’
February 26th, 2013
Roubini: Fed’s Credit Bubble May Be Bigger Than 2003-06
Nouriel Roubini, the respected New York University economist, says the Federal Reserve’s quantitative easing (QE) is brewing a credit bubble that means trouble down the road.
Through QE, the Fed has injected more than $2 trillion into the financial system over the last five years,
“The risk from QE isn’t goods inflation; it’s not going to be a rout in the bond market, because the Fed will exit slowly,” Roubini tells Yahoo. “The risk is like during the 2003-06 cycle. We exited very slowly, and we got an asset bubble.”
But he thinks this bubble could be “bigger than 2003-06.”
Citi Warns Of Italian Rebellion Could Be Contagious
Citi‘s currency guru Steven Englander weighs in on what we just saw in Italy.
This is the first European election in which voters didn’t do the right thing. Instead they gave surprising support to politicians who reject austerity and, in some cases, the euro. This could become a major problem if it proves contagious. The feel-good from the runup in Italian asset markets was not enough to offset the feel-bad from austerity, low growth and unemployment. If all it would take to fix this was an ECB rate cut, they would do so immediately, but euro zone politicians may need to ease fiscal constraints and find ways to quickly stimulate growth. Elections are more problematic than market scares or sentiment shifts as they can’t be undone by printing money. Still the outcome does not seem so dire that a bit of growth and ECB flexibility could not turn it around.
Meanwhile, SocGen currency analyst Sebastien Galy titles his note: “Instability Cubed.”