Roubini: 'Sheer panic may force market shutdown...'

Nouriel Roubini, the prescient NYU Economics Professor and former Clinton administration economist who's maintained a more accurate forecast of our global financial crisis for a longer period of time than just about anyone, today predicted on Bloomberg TV  that the markets have reached a situation of "sheer panic."

Bloomberg (October 23, 2008): Roubini Says `Panic' May Force Market Shutdown...Sees Crisis Worsening, Hurting Emerging Markets.


From Bloomberg:

Oct. 23 (Bloomberg) --

``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, said at a conference in London today. ``There will be massive dumping of assets,'' and ``hundreds of hedge funds are going to go bust,'' he said.

--SNIP--

``Systemic risk has become bigger and bigger,'' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,'' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,'' he said.

--SNIP--

`Very Ugly'

"...It's becoming a mess in emerging markets.''

--SNIP--

"There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. (The article mentioned: Belarus, Hungary, Iceland, Pakistan and Ukraine, in particular.) "Even a small country can have a systemic effect on the global economy,'' he added.  "There is not going to be enough IMF money to support them.''

--SNIP--

"... I fear the worst is ahead of us.''

Tags: Argentina, Belarus, Hedge Funds, Hungary, Iceland, Nouriel Roubini, pakistan, stock market, the Economy, ukraine (all tags)

Comments

36 Comments

Happy Hoidays? Not. n/t

by bobswern 2008-10-23 06:29PM | 0 recs
good

I hope the current system falls apart. It needs to be rebuilt from the ground up.

by NoThirdBushTerm 2008-10-24 05:30AM | 0 recs
fuck you. YOU WANT RIOTS

fuck you.

the system dying is a VERY FUCKING BAD THING.

by RisingTide 2008-10-24 05:49AM | 0 recs
Disagree, some Darwin effect is needed

the parts of the global economy built on a house of cards may need to be allowed to fail.  What's the benefit in sustaining them?

There are still many core areas of the economy that are and will always be strong - those are the areas that need focus and support.  

by Betsy McCall 2008-10-24 07:35AM | 0 recs
snerk. you is funny.

GM is bank. GE is bank.
Anybody not bank is BROKE.

Stockholders wanted bank, they got bank. Now all banks go down.

No economy left. 10th largest economy in world (California) is bankrupt.

How much of US taxbase is california?

We be bankrupt too, yah?

by RisingTide 2008-10-24 07:40AM | 0 recs
The economy is based on more than finance

The finance industry has become too large a part of the US and global economy - we can't live on borrowing and lending money.  There's an inevitable shake-out happening, but other sectors of the economy are moving on and will continue to do so.

by Betsy McCall 2008-10-24 08:06AM | 0 recs
what sectors?

Without consumer spending, we have NO ECONOMY. I'm sorry, but consumer spending for the past eight years has come from multiple mortgages on houses.

by RisingTide 2008-10-24 08:17AM | 0 recs
Consumer spending will continue

But our economy can't survive on convincing people to borrow money and buy junk they don't need while reducing their incomes and making them pay more for energy, health care, etc.

It can't last.

by Betsy McCall 2008-10-24 09:06AM | 0 recs
jobs gone. 401ks gone. homes gone

consumer spending gone.

what part of this is hard to understand???

by RisingTide 2008-10-24 09:33AM | 0 recs
Re: Disagree, some Darwin effect is needed

which parts are these? And don't all parts of our economy depend on funds/banking/loans to a degree?

by Mayor McCheese 2008-10-24 08:09AM | 0 recs
everything depends on commercial paper

meh. Just In Time makes my brain hurt.

by RisingTide 2008-10-24 08:17AM | 0 recs
Manufacturing

research, development of new technologies, building, agriculture, transportation, etc.

Yes they all depend on banking and loans, but as one economist put it - banking and finance are a means to an end, not an end in themselves.  They're only part of what fuels economic growth.

Building an economy based on consumer borrowing is a joke. Its not sustainable.

Joseph Stiglitz talked about some of this on NPR the other day:

http://www.npr.org/templates/story/story .php?storyId=95906243

by Betsy McCall 2008-10-24 09:17AM | 0 recs
Re: fuck you. YOU WANT RIOTS

The core of this particular systemic failure has nothing to do with the technicalities of its operation, which are really fine. Apart from a bit more much-needed regulation of derivatives, and the like.

The core element of the systematic failure of the global markets is the loss of institutional trust.

Under McCain, who was ranking member of the commerce commitee,  and the Bush republicans - the US ceded so much of the control of our public institutions to private corporations, that we were effectively unable to either regulate, or triage.

And that will change under the tenure of President (to be) Barack H. Obama.

by Trey Rentz 2008-10-24 09:31AM | 0 recs
the core of this problem is

TOO BIG TO FAIL

we are blackmailed by our own corporations.

by RisingTide 2008-10-24 09:35AM | 0 recs
Re: Roubini: 'Sheer panic may force market shutdow

My God it sounds horrible but it he seems to have a good track record. Rec

by canadian 2008-10-23 06:58PM | 0 recs
This is about 10's of trillions of $ now.

On top of all of this financial unrest (literally tens of trillions of dollars, which will dwarf what's happened up until now as far as the economy's concerned), we're now talking about major governmental/economic instability, worldwide...and in some of the worst breeding grounds for terrorism, too: Pakistan, Ukraine, Uzbehkistan, etc.

by bobswern 2008-10-23 07:28PM | 0 recs
And america of course

we may not see elections.... Vote Now!

by RisingTide 2008-10-24 05:51AM | 0 recs
Open source economies for 3rd world countries

There's growing interest in open source, regional, sustainable economic development.

My son just presented at a conference on this topic, and it was well attended by people from around the world. He's had several job offers from third world countries looking at this model (Ma says ix-nay on war torn countries)

I'm the old ma, so I may not be describing it well, but it promotes the idea of letting regions, communities, etc. develop their own sustainable economies using their own resources and labor.  

Instead of borrowing money to buy machinery and materials from other countries at high prices to exploit low labor costs and make products they don't have much use for locally - give them access to the information and technology they need to produce what they need to sustain their own local economy.

"This means opening access to the information and technology which enables a different economic system to be realized, one based on the integration of natural ecology, social ecology, and industrial ecology. This economic system is based on open access- based on widely accessible information and associated access to productive capital- distributed into the hands of an increased number of people. We believe that a highly distributed, increasingly participatory model of production is the core of a democratic society, where stability is established naturally by the balance of human activity with sustainable extraction of natural resources. This is the opposite of the current mainstream of centralized economies, which have a structurally built-in tendency towards of overproduction."

http://www.p2pfoundation.net/Open_Source _Ecology

by Betsy McCall 2008-10-24 07:56AM | 0 recs
Re: Roubini: 'Sheer panic may force

bob-

thanks for another inciteful diary.  but i'm curious whether you think roubini is spot-on or is a perpetual pessimist that happens to be correct right now.  this is an honest question.  i'm not familiar enough with the world of economics to know.

thanks.

by the mollusk 2008-10-23 08:44PM | 0 recs
Roubini's by no means...

...a perpetual pessimist. He's just been more accurate than most, as far as his assessments have been concerned, over the past four years, give or take.

It should be noted that he's not--and has not been--forecasting a Depression...just a very severe Recession.

He's very close, philosphically and in terms of his actualy work, with another economist and a big favorite of the Clinton's, Stiglitz, who was Bill's Chairman of his Council on Economic Advisors (Roubini was a member of the Council at the time). Paul Krugman was/is also considered to be a part of this group, both philosophically and in terms of actually workin with them.

by bobswern 2008-10-23 09:44PM | 0 recs
didn't catch his piece on Global Worldwide Depress

ion, didja?

He predicted it a while back.

depression means BAD SHIT for governments

by RisingTide 2008-10-24 05:54AM | 0 recs
Re: Roubini: 'Sheer panic may force

Roubini is a perpetual pessimist. There was a pretty good NYTimes profile piece on him a while back. He seems like a pretty solid and smart economist.

Back in 2004, he called the current crisis, but he predicted it for 2005 or 2006.

by letterc 2008-10-23 09:49PM | 0 recs
Re: Roubini's pessimism

Roubini pointed to the credit bubble[S] created by Alan Greenspan's Fed policies and said a crash would inevitably follow.

The first bubble was the tech stock mania almost a decade ago. Before we could even sober up from that fun, the Fed was offering more hair from the dog that bit us in the form of low interest rates, amazingly cheap mortgages for everyone, and a housing bubble to beat all bubbles.

So Roudini was off in his timing to predict a bust a year or two before it came. But who knew that the housing bubble would last so long completely unsupported by real incomes of buyers? He has been remarkably spot on in his predictions of the size, scope, and severity of the bubble and the bust. And alas, the fact that the bust comes later than he expected only means it is bigger and worser.

Now, anyone who is not pessimistic simply doesn't understand the situation.

by Woody 2008-10-24 09:10AM | 0 recs
Re: Roubini: 'Sheer panic may force market shutdow

Roubini is not helpful..its almost unseemly the way the more the economy tanks the better it is for him.

by obama4presidente 2008-10-23 08:46PM | 0 recs
if the economy is weak enough

one naysaying economist is a problem that's a bad thing.

by Carl Nyberg 2008-10-24 12:41AM | 0 recs
That's a ridiculous comment...

...essentially, you're saying that Roubini's words are some sort of tipping point.

So, if we don't talk about it, it'll go away?

That's beyond absurd.

In fact, that is called: being a Republican!

by bobswern 2008-10-24 06:14AM | 0 recs
Re: That's a ridiculous comment...

I thought I was clear, but obviously your aren't the only one who understood my words differently than I intended them.

The idea that the economy is frail enough that a single naysayer could tip it is far fetched.

But if the economy is in such bad shape then we're in real trouble, because eventually somebody is going to say the magic words and the slide will happen.

by Carl Nyberg 2008-10-24 09:30AM | 0 recs
Re: That's a ridiculous comment...

I think that was more directed at me..

My take on Roubini is I really hope he is wrong...because he was talking about a floor for the Dow of about 7000.. if thats the case its going to be very bloody....

But I do think that when an economist/analyst becomes the flavor of the month because he is essentially the only one who has been right to be so pessimistic AND he continues to be pessimistic and is now even more respected.. I think thats an unfortunate situation...

Some people around here seem to almost rejoice in the economy crapping out (i.e., "told you bush sucked") but its causing and going to cause such real pain that i really hope the market shapes up and people's confidence comes back

I think an obama election win is a prerequisite to getting out of this situation which has largely been caused by a crisis of lack of confidence in the political leadership...

by obama4presidente 2008-10-24 09:44AM | 0 recs
Re: Now THAT's a ridiculous comment...

"... this situation which has largely been caused by a crisis of lack of confidence in the political leadership ..."

No, this situation has been caused by a massive expansion of credit, far Far FAR beyond any increase in real incomes, resulting in a bubble of inflated assets prices covered by an icing of funny-money mortgage lending, and exaggerated by trading and speculation in securities issued by the trillions of dollars that simply were not backed by anything of solid value, but only a hope that prices of houses would continue to rise and suckers would continue to borrow more than they could afford to buy them.

That illusory wealth of the bubble is being destroyed by the trillions because suddenly, everyone has realized that the shit ain't worth what it was sold for and nobody is going to pay those prices for it ever again. The fall in housing prices and now stock prices, the collapse in currencies, that is not because we have suddenly lost confidence in Bush and his boys -- that happened years ago.

The election of Obama will be a good thing, but please do not expect him to provide a miracle cure that will make stuff worth what we once hoped it was worth despite history and reality.

Home prices will continue to fall after Obama is elected. Stock prices will probably continue to fall after he is elected. Unemployment will continue to rise after he is elected. We are looking at ugly times for many years ahead.

by Woody 2008-10-24 02:37PM | 0 recs
Re: Now THAT's a ridiculous comment...

disagree..its all about confidence.

by obama4presidente 2008-10-24 07:16PM | 0 recs
Re: Now THAT's a ridiculous comment...

If you believe its all about confidence then you've been conned.

by Woody 2008-10-27 04:47PM | 0 recs
Re: Roubini has the magic power of words?

The cause of the ongoing crash is not bad words from some economist. The NYU professor has been trying to explain to the public the causes of the crash and how it will probably play out. We are familiar with some of them here on the progressive blogs: Median household income has been stagnant for a decade or three, forcing families to borrow to maintain their standard of living. The federal government has been on an orgy of borrow and squander and running up massive deficits. The Fed accommodated the fiscal consequences of the tax cuts and war spending with record low interest rates and unprecedented credit expansion that created a housing bubble. That bubble is not the first in our history but perhaps the worst, and one magnified by Wall Street dealers in funny money to spread around the world. The balance between real assets and debt got completely out of whack, undermining the foundation of our financial system, and perhaps yet to come, of the value of our money.

Roudini was not the only one denouncing the economic policies of Bush and his enabler Greenspan, and it is not his fault that events are proving his warnings to have been true.

by Woody 2008-10-24 09:23AM | 0 recs
If you even bothered to take the time...

...to learn more (or even just the basics) about Roubini's history and his thinking/philosophy, and his experience with the Clintons, you wouldn't be making this completely inaccurate, shoot-from-the-hip statement, like you are now.

by bobswern 2008-10-23 09:47PM | 0 recs
Re: Roubini: 'Sheer panic may force market shutdow

So all these years of keeping chickens, growing veggies, clearing the sieve in the spring that feeds the water tank and generally favouring rural independence over urban prosperity are going to pay off, it seems.  Ironically the 'law of unintended consequences' may apply in halting the acceleration of climate change due to our impending straightened circumstances than anything our collective global leadership have yet managed, or conceived.

But if the quality of life of the whole of the commonwealth is the true barometer of the health of our 'body politic' I do pray that a renaissance of our pioneering sense of community, commensurate mutual cooperation and intrepid good will among neighbours is the verdict of history on the hard times which perhaps face us.

by Shaun Appleby 2008-10-24 02:37AM | 0 recs
Ugh

I am sure it's illegal (at least in Paulson's case), but if I were Paulson or Roubini, I'd be short-selling EVERYthing.  God, it's ridiculous.  "Hmm...I'd like the markets to go down today...what should I do?  I know, I'll unnecessarily predict a terrible outcome that we can't do anything about.  Tada!"

by ProgressiveDL 2008-10-24 04:04AM | 0 recs
Re: Roubini: 'Sheer panic'

Ha ha ha ha  ha. I suspect that Roubini has not had his money in Securitized Mortgage Obligations, or even in bank stocks, probably not in the market at all for a couple of years or more. He may have a hard time sleeping due to the lumpy mattress as much as to the collapse. And there's a reason to panic. If Roubini, or you or I, pulled money out of the market in time, or yesterday, then where to put the money to be safe?

Put what under the mattress? Currencies will be devalued. Inflation may lie down the road. Assets may be taxed away or confiscated.

No confiscation in this country, right? We're referring to the private 401(k) type pensions being seized in Argentina, right? Or to US government policy in the 1930s? When the US ceased to redeem dollars in gold, it was made illegal for private citizens to own gold money. Federal agents came to the house of my uncle's father, a collector, and confiscated the old coins and notes and bills redeemable in gold.

In some hard times getting rich is the easy part, but staying rich can be much more difficult.

by Woody 2008-10-24 09:36AM | 0 recs

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