Nouriel Roubini RADIOLIVE Interview on the New Normal and Lessons Learned
RADIOLIVE — Nouriel Roubini discusses quantitative easing in the U.S., the dollar, corporate earnings, interest rates, financial reform, and explains what the global economy is going to have to do to get itself out of the mess that it’s now in. Click for AUDIO
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5 Responses to “Nouriel Roubini RADIOLIVE Interview on the New Normal and Lessons Learned”
John Hussman about US financial policy:Good policy is not rocket science. It begins with the refusal to make people pay for mistakes that are not their own. This economy continues to struggle with a fundamental problem, which is that debt obligations exceed the ability to service them. While policy makers have done everything to preserve the patterns of spending and consumption that created the problem in the first place, we have done nothing to restructure those obligations.To the extent that we observe fresh credit problems, we should not pursue the same policies. Instead, we should focus on restructuring debt. Let the bank bondholders fail, and defend depositors and customers through the standard procedures that the FDIC has followed for decades. Deal with the debt of Fannie Mae and Freddie Mac by asserting that there is no explicit government guarantee, and let the holders of the mortgage pools receive precisely what they are entitled to receive without public funds. At the same time, expand the role of the FHA to provide explicit government guarantees for future mortgages in return for actuarily fair risk-based premiums, and require mortgage originators to retain a piece of the mortgage loan, along with appropriate capital requirements, and the stipulation that this retained portion bears the first loss if the mortgage goes bad. Finally, refuse to trot self-interested bank and Wall Street executives in front of the public to extort the nation through fear of the word “failure.” Banks fail all the time and customers don’t lose a cent. The only implication of failure is that stock and bondholders of reckless institutions aren’t rewarded for their malinvestment at public expense.http://www.hussmanfunds.com/wmc/wmc100823.htmNot only refuse those at the financial top to take this pill, they even dare to rely on Bernanke to pay for their mistakes by fresh QE. Bank robbers are in the banks and are instructing their colleague Bernanke what to do.
s,The problem at this point in letting the bond holders take the losses are many. The government implied a secure credit rating on the banks and their toxic securities by not reigning in the credit rating agencies. Many actual holders of the underlying obligations are the pension funds and insurance companies. They were restricted by law and or by mandate to only buying highly rated paper. This was to protect the pensions and annuities. Yet when the credit agencies were allowed to lie about the ratings, this allowed the Banksters to pillage.This has far reaching implications. If the government actually let the banks and other institutions like FNM fail and the bond holders take the losses, then all those who are being supported by this system would also be taking the losses.This would be devastating to the entire economic system as retirees all over the nation would have their pensions reduced or when the guarantees kicked in causing taxes to rise dramatically and public services, including schools to take a very large hit in income. The economy would shrink dramatically and the deflationary spiral would accelerate.After the failure of government to regulate, there really are NO good policy solutions. The consequences of NOT bailing out the TBTF would have been immediate and would have had immediately angered one of the major voting blocks, the retirees plus it would have put the country into an immediate depression.The consequences of bailing them out will mean years of pain and slowly building anger by the public because this policy protected the same people who created the problem and punishes the rest of us. Slowly….You and I might have done things differently but then again given the same circumstances and urgency fed to us by the same scammers who created the toxic assets and sold them to the elderly, the widows’ and childrens’ pension funds, who knows what either of us would have done.I too am frustrated that the current administration and Congress can’t get it together to put the safety net back in place to keep the rogues and scammers from continuing their abuse of the majority for the benefit of the few. I would like to see Geithner and Summers gone and Congress to quit their petty infighting and posturing. At this point, I think the current environment will continue until we have a total collapse because the leadership of the country is stuck in its circular logic of exponential debt which pays the exorbitant incomes of the Robber Barrons of which a portion is funneled into campaign contributions and pay offs.I would be thrilled to see a change in direction but doubt that it is going to happen without a greater outside force. That force will probably come from what is known as the Bond Vigilantes. But it could come from a major muni bond default or an collapse of some state’s finances. The numbers just don’t make sense in my brain with the way PEUs and other large pension funds run. Unions are in themselves just as insane as the Robber Barrons/Banksters.Something will happen though. When something can not continue, it does stop. The consequences are building and there will be pain.It takes productive enterprise to support non productive activities like retirees, the disabled, wars and a lot of what government does. In this, we are way out of balance and many of the benefits of what productive enterprise creates goes to the Banksters instead of to support normal non productive activities. And our governments borrow the difference. This is totally unsustainable.
Thank you for the insightful and levelheaded response to the first post, “e.m.”, & thank you for posting the Hussman piece, “s”.Hussman outlines what our guts tell most of us is right, and our blood boils that common sense was thrown out the window as the financial industry raped us while the regulators stood by and watched.On the other hand, “e.m.” strips out the emotion and analyzes the situation as it stands.This is a great 1-2 punch that cleary sums up the situation.Conclusion – we are screwed.Thanks, again.Independent Contractor
EM and IC, thanks for the reaction. Guess we have a fairly accurate view on the situation, there’s not much we can do to change it. So be it. Just sit and watch the children play…The ever existing is a child at play, moving pieces in a game. Kingship belongs to the child (Heraclitus, 500 BC). Guess he was right. Let them play, their game will end when the next game begins…
The only advice I can give is for everyone to have food, water and live outside the major metro areas of the country. Because when the anger boils over, remember Watts and Chicago riots? When people go from denial and frustration to anger, anything can happen and it doesn’t take much of a spark to set bad things in motion.I sure wish our government would move from distraction, lies and supporting the status quo to moving in the direction of what is right. Even if it causes pain to them and us. Even they should understand that what they are doing isn’t working. This is stupid verging on insane in such a volitile world. They are playing with matches in a pool of gasoline IMHO.Good luck to all of us.