The Almighty Renminbi?
From The New York Times:
THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear.
Traditionally, empires that hold the global reserve currency are also net foreign creditors and net lenders. The British Empire declined — and the pound lost its status as the main global reserve currency — when Britain became a net debtor and a net borrower in World War II. Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be only a matter of time.
But what could replace it? The British pound, the Japanese yen and the Swiss franc remain minor reserve currencies, as those countries are not major powers. Gold is still a barbaric relic whose value rises only when inflation is high. The euro is hobbled by concerns about the long-term viability of the European Monetary Union. That leaves the renminbi.
China is a creditor country with large current account surpluses, a small budget deficit, much lower public debt as a share of G.D.P. than the United States, and solid growth. And it is already taking steps toward challenging the supremacy of the dollar. Beijing has called for a new international reserve currency in the form of the International Monetary Fund’s special drawing rights (a basket of dollars, euros, pounds and yen). China will soon want to see its own currency included in the basket, as well as the renminbi used as a means of payment in bilateral trade.
At the moment, though, the renminbi is far from ready to achieve reserve currency status. China would first have to ease restrictions on money entering and leaving the country, make its currency fully convertible for such transactions, continue its domestic financial reforms and make its bond markets more liquid. It would take a long time for the renminbi to become a reserve currency, but it could happen. China has already flexed its muscle by setting up currency swaps with several countries (including Argentina, Belarus and Indonesia) and by letting institutions in Hong Kong issue bonds denominated in renminbi, a first step toward creating a deep domestic and international market for its currency.
If China and other countries were to diversify their reserve holdings away from the dollar — and they eventually will — the United States would suffer. We have reaped significant financial benefits from having the dollar as the reserve currency. In particular, the strong market for the dollar allows Americans to borrow at better rates. We have thus been able to finance larger deficits for longer and at lower interest rates, as foreign demand has kept Treasury yields low. We have been able to issue debt in our own currency rather than a foreign one, thus shifting the losses of a fall in the value of the dollar to our creditors. Having commodities priced in dollars has also meant that a fall in the dollar’s value doesn’t lead to a rise in the price of imports.
Now, imagine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing imports and exports, as well as a store of value for wealth by international investors. Americans would pay the price. We would have to shell out more for imported goods, and interest rates on both private and public debt would rise. The higher private cost of borrowing could lead to weaker consumption and investment, and slower growth.
This decline of the dollar might take more than a decade, but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable. A system where the dollar was the major global currency allowed us to prolong reckless borrowing.
Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.
Nouriel Roubini is a professor of economics at the New York University Stern School of Business and the chairman of an economic consulting firm.
83 Responses to “The Almighty Renminbi?”
Guest • May 14th, 2009 at 8:23 am
I cannot believe it. Finly the first at something
Guest • May 14th, 2009 at 8:24 am
Even misspelled it in a haste to be the first.
MA • May 14th, 2009 at 8:28 am
Ch-Enron!!!Freedom of speech and other human rights are needed in China before anyone will have legitimate faith.Putting our faith in “black boxes” has historically proven UN WISE!!!Miss America
Hayes • May 14th, 2009 at 8:33 am
In recent months, Roubini has secured the position as the official Dr. Doom for a wider audience such that he has become the embodiment of the worst case scenario for the MSM. Accordingly, prescriptions he offers to cure America’s (the world’s) economic ailments carry a great deal of influence, particularly among those with bearish tendencies.In his current New York Times OP-ED he concludes with this prescription to save the dollar and America’s economy:”This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.”I must admit that I continue to be troubled by the apparent conflict of interest that the professor had (has) with his non-disclosed business relationship with Larry Summers who was a part owner and paid advisor of RGE up until this past December.As I read the Roubini’s prescription to save the economy it strikes me as very similar to what the administration and Larry Summers have been saying.It would be nice if the professor would comment on why the Summers business relationship was not disclosed or better still point to where it was disclosed.Summers’ White House Disclosure
MA • May 14th, 2009 at 8:36 am
for example… they silence and jail whistle blowers and critics!?!?!?!…but then again… maybe that is the way to do it? If our recent wealth and was an illusion, and our break from Russia during the cold war (to become the world “super power”) was obtained by creating an ultra complex ponzi system… then China’s attempt to quiet the critics within might be the answer???The internet/bloggers/etc… were in my opinion the toppling of our hoax. …because the media, regulators and politicians cetainly weren’t doing their part in keeping the public informed or keeping Wall St in check (or honest for that matter!).Miss America
Guest • May 14th, 2009 at 8:51 am
Melvin T. Furd III Jr. • May 14th, 2009 at 8:57 am
Holy Mackeral!!! thanks for that Mr Hayes $500 g’s +in a month for 8 speaking engagements!!! and that’s only part of it. How many hours work is that..? lets see thats about $62 g’s average for each speech and unless he’s like Castro about an hour or two for each talk, lets say 3 hours prep for each speech so 5 hrs per speech so that’s $12,500 per hour. Why do they pay so much to hear this guy talk? Wouldn’t it be better to give scholarships to help our miserably deprived schools?? No wonder we’re sinking, its just plain Bad Karma.
MA • May 14th, 2009 at 9:13 am
No way around it… that was interesting Hayes!I was unaware.MA
Guest • May 14th, 2009 at 9:14 am
Again, whoop-de-friggin’-do. So what? You are surprised that academics who served together in the Clinton Administration are linked? I have to keep going back to all of the money NR has saved me with his prescience over the last couple of years. Pick your battles more carefully, would you please?
Little Saver • May 14th, 2009 at 9:17 am
Don’t forget the champagne!
JGU • May 14th, 2009 at 9:20 am
This is one of your best article, my good professor. US is on the decline, no question about it. The only thing that is still supporting this sucker is the green back, without the reserve status, US will be a regional power soon.
Guest • May 14th, 2009 at 9:29 am
Barack & Teddy (Roosevelt)The first crisis facing the Theodore Roosevelt administration…a devastating coal strike…was solved when J. Pierpont Morgan was pushed into compromise with the young president.Railroad magnate Morgan had taken it upon himself to force the coal mine operators to agree to arbitration with striking miners as long as the operators got to select the kind of people who would serve as arbitration commissioners. But “Pierpontifex Maximus” underestimated T.R.’s skill at picking commissioners. J.P. Morgan’s original offer left no room for union representation on the arbitration commission. But Roosevelt pushed them on anyway by allowing Morgan to save face with the operators if they were not identified as labor.“While they (Morgan’s people) would heroically submit to anarchy rather than have Tweedledum,” wrote Roosevelt, “yet if I would call it Tweedledee they would accept it with raptures; it gave me an illuminating glimpse into one corner of the mighty brains of these ‘captains of industry.’”Collier’s Weekly had once noted that “you can ride from England to China on regular lines of steamships and railroads without once passing from the hollow of Mr. Morgan’s hand.”How then could it be that the powerful House of Morgan was pushed around by a 43-year-old upstart in Washington yet to make a name for himself by that October in 1902? J.P. was tough, but the real answer was that it was to be 11 more years before bankers like Morgan would get the veto power they needed over men like Roosevelt. That, of course, was the passage of the Federal Reserve Act of 1913.Fast forward, then, to 2009 and the crisis facing another young president.There’ll be no pushing bankers around any more of course, so 47-year-old Barack Obama can only pretend he could be a trustbuster. A Bloomberg story this week shows how the government (now pushed around by Goldman Sachs and its personal representative on this earth, the New York Federal Reserve Bank) is handling supervision of bad boy A.I.G.In summary, troubles at A.I.G. are like found money for the Goldman boys. They run the N.Y. Fed and this is the hot house for Bernanke’s power, Geithner-Summers experiments, and the absolute control of everything from those green slips of paper with Washington’s picture on them to, if it wanted, what Michelle Obama will wear to dinner.Unlike J.P Morgan in 1902, the N.Y. Fed was able to select and manage the government’s A.I.G. supervising trustees, assigned to safeguard the people’s $182.5 billion investment in A.I.G., with no real White House or public participation.With the power to select, direct, pay, hire and fire these “public servants,” the N.Y. Fed then put Goldman people in place to handle “the public’s business.” All of the proceedings, naturally, are protected by the secrecy and the unrestricted power of the Federal Reserve. Since Goldman is a major recipient of the taxpayer billions flowing into A.I.G. and out again, this arrangement becomes the most obvious abuse of pubic trust ever, this in an age literally defined by the abuses of government.Theodore Roosevelt in 1901: “Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and duty to see that they work in harmony with these institutions.”The 111th Congress and the Obama Administration are in dereliction of exercising this “right and duty.”Bloomberg article referenced above:http://www.bloomberg.com/apps/news?pid=20601109&sid=avjlPu.bRVmk&refer=home
Hayes • May 14th, 2009 at 9:31 am
Guest (why do you not identify yourself?)I have no issue with the professor’s academic and professional relationship with Getithner and Summers. He has disclosed those in previous articles.The issue I have is that Larry Summers was a part owner of this blog. Think about that for a moment, Obama’s top economic guy was an owner of RGE as recently as December 2008. Not only that, he was paid almost $150k by RGE as an advisor and yet from what I have been able to determine not a word of disclosure about that business relationship. All the while this blog has ringing endorsements (for the most part) of White House policies and full endorsement of Summers.This is not a question of picking battles, rather it is a matter of transparency.
Guest • May 14th, 2009 at 9:45 am
Your comment seems to be somewhat off topic; the topic is a significant one to anyone who has followed the Professor’s career and philosophy.It seems a good time for Dr. Roubini to weigh in and clarify.
Hayes • May 14th, 2009 at 9:54 am
agreed but it is not off topic – in fact it cuts to the very heart of the professor’s recommendations in his OP-ED, which happen to mirror those of Summers et. al.
Free Tibet • May 14th, 2009 at 10:14 am
The thought of monetary crisis is becoming more mainstream. Our professor now reflects on the possibility of a loss of reserve currency status for the dollar. Though he seems to make the same assumption that every economist seems to make; that the dollar can’t lose it’s reserve status until some other currency is prepared to bear that load and he doesn’t see that happening for the RMB for a decade. His friend Mohamed El-Erian wrote similarly in his book published last summer.Also from:Fiscal Meltdown Will Test the Bond and the Dollar to the Breaking PointRegarding US budget:
“Outlays are rising at 17% YOY the fastest nominal pace since late 1981. With receipts falling 14.6% YOY their fastest drop in at least 40 years the gap between their growth rates is also the widest in the record.All these rates are accelerating and are threatening to push the deficit to more than 50% of receipts and – at $1.1 trillion and rising – to more than 10% of private GDP.”
I can’t imagine we might still have a decade to get things fixed. And I don’t see how we can get things fixed in a generation. So, that would imply that things come apart before there is a replacement.What does that world look like? What does the world look like without a reserve currency? The last time I brought this up London Banker called me nuts. Well, it looks like barter economies to me. Can we even contemplate that? I can’t. It’s beyond my imagination.The question is, where do you want to be? Gold, professor’s “barbaric relic”? Not me. I want real goods. Tangible value. Or, at a minimum tradable skills. Not “credits” from some destined to fail institution. How do I get there?
FEDup • May 14th, 2009 at 10:16 am
“off topic”???? When transparency, full disclosure are considered “off topic”, then you might as well walk around with your eyes and mouth shut, your ears covered and simply turn over your entire body and mind to someone else. Does anyone think for 1 millisecond that a lack of transparency and full disclosure did not play a MAJOR role in this and well as every other crisis and injustice since man began to rule the planet?! Yes, I’m being melodramatic; but no true solutions can be found when information is withheld from people and while I’m not accusing NR of deliberately hiding this info, I feel it would have been much better for him to disclose it.
Dan • May 14th, 2009 at 10:23 am
“This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.”HayesI must be missing the essence of your concern. Previous NR’s association with Larry Summers is less important to me than the actual meaning of the quoted statement. On its own the statement really says everything that many people on this blog have been saying for very long time: we have to get back to basics and start producing rather than simply blowing bubbles and conducting financial engineering. Please tell me where do I go wrong on this?.
FEDup • May 14th, 2009 at 10:27 am
GREAT news for another market rally: initial jobless claims rose more than expected to 637k in the week ended May 9 and Chrysler wants to break its contracts with 789 automotive retail outlets. Now even a 10 year old would draw the same conclusion: loss of more jobs not good for economy or markets!
Guest • May 14th, 2009 at 10:33 am
I was referring to Guest 14:01′s topic, i.e.,his portfolio and his views on linked-up academics, as off topic (what do they have to do with disclosure?); you, Hayes, are very on topic. Sorry for the obscurity–I need to use nouns rather than pronouns. Disclosure is always the best policy: it clears the air. 
Guest • May 14th, 2009 at 10:43 am
The market is directionless–while, ultimately, on its way down.As Alan Abelson put it this week: “What’s all the excitement about? The economy has stopped falling off a cliff and –Glory Hallelujah!–it’s now merely rolling briskly downhill… No guarantee, mind you–economies being notoriously quirky–that on the way down, if it espies another nice-looking cliff, the blamed thing won’t decide to take a leap off that one.”
MM CA • May 14th, 2009 at 10:50 am
NO JOBS! Weekly Unemployment up big…As far as housing, most of the points in this article are spot on, although i beliebe NO JOBS will lead to larger % of home value and larger foreclosure numbers. And as for The Gov’t and the Obama team- there is no freaking FIX to help people retain thier homes, nothing, zip, nada…The Real Housing Crisis Has Yet to Beginhttp://www.minyanville.com/articles/MSFT-C-citigroup-jpm-bac-mortgage/index/a/22654/p/2
MM CA • May 14th, 2009 at 10:51 am
We are about to implode out here… read between the lines… massive cuts and layoffs coming no matter what… Calif unemployment already over 12%…California Asks For TARP BailoutYou knew this was coming.There have been various ideas floated for how the federal government can bail out the state of California. Some of it’s already happening via money coming in through the stimulus. And a plan to backstop the entire muni market would be a (not so subtle) backdoor bailout of California, if it happens.And now the state is just directly asking to be part of TARP.MarketWatch: In a letter, Lockyer asked Geithner for TARP assistance for California and “other financially strapped states and local governments which face a severe cash flow crunch.”"If we cannot obtain our usual short-term cash-flow borrowings, there could be devastating impacts on the ability of the State or other governments to provide essential services to their citizens,” Lockyer wrote.In particular, Lockyer cited fire and police protection, education and social services.See Tim? If you deny them TARP, there will be more crime, less educated children and more people will die in fires.Getting TARP cash may actually be the state’s best shot at getting a bailout. If they actually had to get a law passed by Congress, there’s no way the non-California Congressmen would support it. But TARP — despite being a program to buy toxic assets from banks (ha!) — has morphed into a program that’s basically anything the Treasury sectretary and the President want. PPIP, cars, insurance companies, you name it. So why not states?
MM CA • May 14th, 2009 at 11:07 am
Roubini knows the dollar is about to spiral downward. Whae he doesnt know is how fast, bacuase he doesnt know how long the FED and Treasury will artifically prop it up. 10 years is a long time, but if ti takes 10 years, that will be 10 years of pain and inflation. if it collapses faster, maybe then we can start to fix things for real. Dollar is down about 8% since the rally and I beleive will be down 50% across the baord by DEC 09. what happens after that is anyones guess, but it will not be good. Inflation will be roaring by Fall 09.Roubini proably has some inside info from his insider Friends: Consider these points: 1. If they are lying to him about things getting better so he spins things better, it might be one reason for him sounding more optimistic. 2. If he feels they are lying to him becuase the numbers he sees don’t equate, then one could interpet some of his posting like this one about the dollar as heads up- things are not better and could get worse. 3. He also could’ve been asked flat out to tone down his bearishness by his insider friends.I think its point 2, and he sees much more doom, gloom, and risk ahead… he deals with the numbers and cannot go against the numbers ultimaltey- it would be counter to his make-up. and the Numbers dont lie, things are BAD!
Hayes • May 14th, 2009 at 11:10 am
Perhaps a coincidence that the professor’s prescription in his OP-ED is a page taken from the Administration’s economic plans. Perhaps too, a coincidence that the professor endorsed and continued to endorse Summers’ appointment by Obama while Summers continued on RGE’s payroll. But there is the appearance of a conflict of interest.I think as Guest above suggests, the professor has an opportunity to weigh in on the apparent non-disclosure that Larry Summers was an owner and on the payroll of RGE Monitor.
TfT • May 14th, 2009 at 11:15 am
NEW THREAD
Guest • May 14th, 2009 at 12:35 pm
Maybe his/her name is Finly … and now “Finly” the first at something…
krb • May 14th, 2009 at 1:29 pm
Dr Roubini,You’ve been extremely accurate in your forecasts for almost 3 years now, and I appreciate it. You’ve been a tremendous help to those of us who actually followed through with portfolio adjustments based on your warnings.Your prescriptions for recovery, which have been consistently Keynesian, are more debatable. While you’ve taken issue with small parts of the last and current administrations’ responses, you generally have been aligned with them in the larger view that we should spend and print massive amounts of money to work our way out of this crisis.Advocates of the Austrian school disagree with you. Despite several requests over the past months in this blog, you continue to avoid even discussing why the Austrian school approach would have been worse, better, more or less painful, in the short or long term, etc.Now, you come with this from today’s writing……”This decline of the dollar might take more than a decade, but it could happen even sooner if we do not get our financial house in order. The United States must rein in spending and borrowing, and pursue growth that is not based on asset and credit bubbles. For the last two decades America has been spending more than its income, increasing its foreign liabilities and amassing debts that have become unsustainable. A system where the dollar was the major global currency allowed us to prolong reckless borrowing.Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation. This will be the only way to slow down the decline of the dollar, and sustain our influence in global affairs.”…….well no kidding! This is what the Austrian schoolers have been saying from day one. You can’t have it both ways. By doing so you’re behaving more like a politician than a problem solver. And the argument that we should spend now and we can worry about more sound policy later……in essence, let’s dig the hole deeper now and don’t worry, we’ll have no problem climbing back out of it later……is less and less believable with every additional trillion dollars of debt we take on.Once more, please address the increasingly public debate between the Keynes and Austrian/Mises followers on how best to restore our financial condition. Thanks.
devils advocate • May 14th, 2009 at 1:40 pm
today, the NY Times has both Dr. Roubini and a Chinese speaking about the US dollar the same op-page (opposite the editorial page)the Chinese writer had served as interpreter for the leader (Deng) who opened China to Nixon and welcomed in capitalism and the US Dollar…I speculate/believe that the Chinese Govt is speaking to America through himsaying: build in an inflation-protector for our US dollar investmentmost stores in China no longer will accept the US dollarwe (China) no longer value/trust the US dollarin effect, the Chinese Govt (through this writer) is talking to TPTB andthe USAthe Administration has lost the world’s/China’s confidence in the USA/dollar…if such confidence still existed, then these two letters would not appear
Cahill • May 14th, 2009 at 1:43 pm
I have to say I would not mind if the Professor cleared the air on this one, however if he chooses not to, it will not affect my reading of and participating in this blog, nor will it diminish my respect for the man. The professor has his opinion and analysis, most of it I agree with but there are portions that I do not agree with. His association with Summers does not affect that in the least. I will use my own deductive reasoning based on research (whether done here and or elsewhere) to reach my own conclusions. I just don’t think this is as huge of an issue as some do. I realize that you are saying he has a responsibility as so many are listening to what he says, but we have to realize we are each responsible for our decisions and if people follow blindly they have no one to blame when the leader is wrong.
Cahill • May 14th, 2009 at 1:48 pm
And now one of my greatest fears is coming true. States will lose their power and we will truly all answer to the federal government. Once states start taking this money there will be strings attached and the Golden age of this country will truly be gone.
devils advocate • May 14th, 2009 at 1:54 pm
the world’s TPTB have agreed to not screw the US dollar…it’s “safe haven”TPTB say if things get better (stock market rises) (“Recovery”)then the US dollar will weaken…but then and only thenhowever, TPTB recognize the US is printing/borrowing way too much…more and more holes are springing leaks in the dikeswhich more dollars temporarily fillso China wants an inflation-protector for its investments in US dollars,and is getting the world and the IMF ready to replace the US dollar with a new world currency for the good of the entire worldthe IMF will then demand the USA tax more and cut its budget just like it has done many a time with a “banana Republic”
devils advocate • May 14th, 2009 at 1:58 pm
ps. Dr. Roubini consults with various governments…so I wonder if China is not talking through him as well
PoManFerrari • May 14th, 2009 at 2:26 pm
California needs to take a page out of GS and AMEX playbook: turn itself into a paper bank.
Free Tibet • May 14th, 2009 at 2:39 pm
Lots of us asking these same questions.
Bob Dobbs • May 14th, 2009 at 3:12 pm
All hail “Finly – the First.”
London Banker • May 14th, 2009 at 9:34 pm
@ Free TibetI don’t recall calling you “nuts” so tried to find the exchange. Instead what I found below belongs here:
The benefits received from the outsourcing of production (globalization) and the savings which accrued, were invested in non-productive assets (via US Treasuries/GSE’s, leveraged and then into things like real estate and corporate debt – I’m thinking about the part that went to buy back shares) rather than productive ones (plant & equipment, education, infrastructure, even health care). The failure is on the part of financial intermediaries to identify productive uses when confronted with that windfall.That has happened again and again as investment follows the conventional wisdom of the time. In the 70’s it went to Latin America. And in the 90’s it was Asian real estate bubbles. But the place doesn’t matter. The difference is between production and consumption.The problem with the non-productive (consumptive) uses is that in the case of any disturbance you can’t work your way out. That’s what non-productive means. You can’t turn that investment into producing something better. Or even different.It’s simple for someone stuck in the conventional wisdom mindset of the moment to declare that the “risk models” were deficient and go back to his desk to rewrite them. That misses to point. As long as loans are made strictly on the basis of the ability to service debt the loan is at risk of those disturbances. The risk models always miss that. By definition the disturbances are unpredictable.Yet for me to simply blame the failure on financial intermediaries is not satisfactory either. As OuterBeltway says, “the front lines have moved”. So, when we talk about restructuring the American economy we shouldn’t limit ourselves to talking about the finances. Structural change. And present policy is all about propping up this failed system.By Free Tibet on 2008-08-02 12:25:04
With monetary excess accelerating at all the OECD central banks, it is hard to know where investment flows might pool to preserve capital in these risky times. The second order effect of collapsing tax revenues and eroding public services will create huge political risks – as in California and Britain. Resource economies are attractive, but as it has again and again for over 100 years, the US might use its military and intelligence services to seize or destabilise what its bankers cannot grasp and hold.
P1AQL • May 14th, 2009 at 9:38 pm
@MA,The internet and the bloggers are the latest dollar assets that are newly valuable. America finds the right way after trying every other wrong way. That’s democracy.What can I say? May the USD be with you!Best,P1AQL.
latin seneca • May 14th, 2009 at 9:41 pm
Sorry Miss America but history has more than one case were hegemony ( forgive my english) was not a function of Freedom of speech and human rights. The article only confirms what is already obvious. The USA of the 21st century is the UK of the 20th century,but with far more social, economic and social justice issues.
latin seneca • May 14th, 2009 at 9:51 pm
Oh boy how it hurts not to be in power any more!! Grown up people able to see reality and historical lessons, worldwide, can make their own mind and take apropiate actions. God ideas are good ideas, regardless of agendas and the professor has saved a lot us few pennies free of charge.Thanks for your transparency on your good ideas and opinions dear professor
latin seneca • May 14th, 2009 at 10:06 pm
´Let´s see. Let all the financial system go to hell without factoring in the social and political consecuences sounds like the recipe another famous Austrian used to raise to power. Sorry but not easy way out. IT is not abut academics it about pragmatism to save some of your country`s democracy, people, and precarious world “peace” ( sorry pakistan, Afghanistan, Irak, Sri Lanka).
JTB • May 14th, 2009 at 11:22 pm
But before: WORLD WAR III! Don’t forget Clausevits: war is an unfolding of the politics, and this one is the unfolding of economics! USA will go to the war! Against who? We all know the powerfull USA’s enemies! They are the canditates of the next master of the entire World! We all know very well who they are: the same of the past World War, not anothers!Mis besos
JTB • May 14th, 2009 at 11:24 pm
Please, not “economics” but “economy”! Sorry, my English is catastrophic!
JTB • May 14th, 2009 at 11:45 pm
I’m perceiving some afraid in this Roubini’s hipotesis: the hipotesis CHINA!Why not the Euro? China is the enemy that USA wants ardently, sure! China is an economic and geopolitical very weak enemy! CHINA’s strategists knows that very well, and they are all very smart: China has powerfull and solid allies! And this lider allies are the real strategic enemies of USA!When the USA comes to the public to nominate their all real enemies, and vice-versa, the WW III will start soon! Follow the movements of the current geopolitics, and you will find the clear path to the next WW! No illusions professor Roubini, no illusions… the main conflict in the world will be CENTER-CENTER not CENTER-PERIPHERY! Your real enemy is in the center of the economic world, as ever before, and economy explain about all the factors that are determinating this scenery!
Guest • May 15th, 2009 at 12:52 am
China might have lots of currency reserves, but…How did they amassed them? By providing cheap labor to foreign companies who moved their production there.Culturally and lingustically chineese are very isolated in the world. It was easy for the world to accept the US as a new superpower because it shared so much with UK the 1st modern world superpower. And to a large extent a peaceful transition form the UK to the USA happened with mututal cooperation. It will be very difficult for most people around the world to acquiescence to China as a #1 superpower and accept yuan as a new buck.A country with censored Internet access has no chance of becoming a world leader. Not even 10 years from now.
Guest • May 15th, 2009 at 4:43 am
I think era of superpowers is over. I think countries wont fight countries but it will be more like wars in afganistan and iraq. Great powers would not be able to fight every where so they will shrink within their borders.
Rohelio • May 15th, 2009 at 5:40 am
Typical anglo projections. Chinese play Go, you play Chess.
Guest • May 15th, 2009 at 7:08 am
China should do like America. Get guarantees from the ISPs that they provide information about everyones surfing habits. Then at the same time talk so that the populace by no means loses the illusion of privacy and personal freedom.
Chignos • May 15th, 2009 at 7:43 am
Roubini has his personal money in index funds. He doesn’t disclose his financial association with Summers. He calls gold a relic of the past. He admits he’s a Keynesian. Will he ever address the Austrian economists? No. He isn’t that serious (or honest) an intellect.
devils advocate • May 15th, 2009 at 1:35 pm
“power corrupts and absolute power corrupts absolutely”the USA Administration/Govt is rapidly taking power over industriessocialism for the good of the people/countryso far, it’s only been steppping on the toes of auto co. bondholdersbut it is like a baby learning to walkand that was its first step
nassim • May 15th, 2009 at 3:17 pm
A good analysis of the condition of the Great Britain Empire is given by historian F. William Engdahl. Highly recommended read as to the causes of the two WW’s and the politics of oil since 1890′s.Britain was taken over by the bankers… slept as Germany’s naval techonology advanced in leaps and bound and threathened Loyds of London, and had to be destroyed, along with millions of lives…But he tells it a lot better. See his web site or get his book, A Century of War.
Free Tibet • May 15th, 2009 at 4:14 pm
Say, I almost missed this. It’s nice to see you here again.I don’t remember writing the above. And I don’t remember what the “nuts” thing was about. Though I remember that pretty clearly.Hope you’re doing well.
Free Tibet • May 15th, 2009 at 4:23 pm
There is more meaning in what you said.A dollar crisis would almost guarantee a political (read military) attempt to “stabilize”. “Shock Doctrine”. Never let a good crisis go to waste.Guess that’s nuts.
BJ • May 15th, 2009 at 5:48 pm
“Now that the dollar’s position is no longer so secure, we need to shift our priorities. This will entail investing in our crumbling infrastructure, alternative and renewable resources and productive human capital — rather than in unnecessary housing and toxic financial innovation.OOOps! you forgot to mention one major drain on our economy. Military Budget. More than 50% of what tax payers pay for federal taxes go to Military budget. At least 60% of it is pure waste.While state governments cutting teachers and basic needs, The military budget hasn’t been touched. Obama has the same MIL budget as G.W had!Lets talk about that,
ron • May 15th, 2009 at 5:58 pm
Good point, I don’t see the US letting go of it’s mighty military as that may be the last ace this country has if the reserve status dwindles away. And that ace requires much money to make it work. Next 15 years will prove interesting, perhaps too interesting.
Rcoutme • May 15th, 2009 at 11:25 pm
The U.S. is not likely to be ‘relegated’ to regional power status. The U.S. controls the world’s oceans. There is no other power even close.As for economic activity: I agree that if we do not get our house in order, the visitors will start to visit elsewhere. Our trade deficit is probably the biggest problem, and that is being kept artificially high by nations that export to us (China, Germany, Japan). We have to start limiting the influence that those countries have on our currency. They are, more or less, using a ‘beggar thy neighbor’ approach to trade.
Guest • May 16th, 2009 at 1:38 am
That’s about as “nuts” as invoking the military to deal with flu. Which is to say – in 21st century America – not nuts at all. God forbid the US should spend government money on doctors and clinics instead of military preparedness for lockdown of cities and domestic insurrection control.
Guest • May 16th, 2009 at 6:15 am
Austrian economics isn’t serious. The picture looks a lot closer to the Marxist school than the Austrian.
devils advocate • May 16th, 2009 at 7:50 am
second baby step: firing heads of banksthe govt schmess -stress tests the banks, cooks the books with them and then fires some of the Big Chiefs…grabbing more power, installing their own picks and intimidating the rest
Guest • May 16th, 2009 at 1:37 pm
era of superpowers is over. era of usa as superpowers is over too. dollar will shrink in role of global trade currency. Europ, you have EURO. Asia, you have their version of IMF and their version of basket of asian currency or asia currency is just matter of time. next is for emerging market to step up. countries around the world is moving forward. USA not backward though, but standstill…
Guest • May 16th, 2009 at 1:40 pm
some trade in Latin America, Africa, Asia are being asked to settle in Chinese Currency. probably not optimum, Asia should probably have some kind of basket of asian currencies or asian currency to settle trade. but the trend is definitely, avoid settle the trade in dollar, hence reduce dependency on dollar.
Softwarengineer • May 16th, 2009 at 2:28 pm
FREEDOM OF SPEECH ON THIS BLOG?I’ve had one blog removed “California II” today and a comment about California’s severe water shortage never printed….Does Dr. Roubini have a new blog editor that hates “freedom of speech”?God help us us if its true.
Guest • May 16th, 2009 at 4:59 pm
Softwarengineer, what do you mean by “California II”? Do you mean, like:Californians invented the concept of life-style. This alone warrants their doom. – Don DeLilloorI love California, I practically grew up in Phoenix. – US Vice President Dan QuayleorWhatever starts in California unfortunately has a tendency to spread. – Jimmy Carter, a remark in cabinet meeting, 1977?And by Calfornia water shortage do you mean, like:“California faces ‘grimmest water situation ever’” (February ’09) .. Drought causes the state’s agriculture industry to disappear while residents continue to consume water at high levels…?http://www.guardian.co.uk/world/2009/feb/04/water-shortage-california-droughtIf so, there’s probably been a mistake.
Chignos • May 16th, 2009 at 11:28 pm
Oh, Austrian economics is dead serious. Or, did you mean the picture you have of Roubini is as a Marxist? I’m not sure I could agree with the latter……Roubini is not that serious.
Guest • May 17th, 2009 at 12:39 am
[warning: a heartless conspiracy theory follows]The conspiracy theory is that perhaps H1N1 came because the government(s) realized that they cannot solve the unemployment problem but that it will simply keep getting worse. Instead of attempting to creating more jobs, they decided to reduce the amount of job-seekers.Swine Flu May Be Human Error; WHO Investigates Claim
The World Health Organization is investigating a claim by an Australian researcher that the swine flu virus circling the globe may have been created as a result of human error.Adrian Gibbs, 75, who collaborated on research that led to the development of Roche Holding AG’s Tamiflu drug, said in an interview that he intends to publish a report suggesting the new strain may have accidentally evolved in eggs scientists use to grow viruses and drugmakers use to make vaccines. Gibbs said he came to his conclusion as part of an effort to trace the virus’s origins by analyzing its genetic blueprint.“One of the simplest explanations is that it’s a laboratory escape,” Gibbs said in an interview with Bloomberg Television today. “But there are lots of others.”…Gibbs and two colleagues analyzed the publicly available sequences of hundreds of amino acids coded by each of the flu virus’s eight genes. He said he aims to submit his three-page paper today for publication in a medical journal.
(source: http://www.bloomberg.com/apps/news?pid=20601087&sid=a8cXPBDSbUeo&refer=home)
TheAl • May 17th, 2009 at 12:40 am
and why do you call yourself Softwarengineer…are you working for Pentagon or something…
Guest • May 17th, 2009 at 1:35 am
Don’t kid yourself. You would have been already detained by “peoples police” or what- ever they call it there if you would have written the same comment from inside the “Middle kingdom”… FYI ISP’s do not collect surfing habbits they retain records.
Guest • May 17th, 2009 at 12:52 pm
The capital will move to productive human resources and infrastructure by letting the markets become free. The govt has interfered and messed the whole situation up, which is the biggest threat to the dollar. If the recession would have run its course, then a much needed reorganization and recreation in productive elements would have taken place. Now it is a melee.
Softwarengineer • May 17th, 2009 at 1:03 pm
SOFTWARENGINEER IS MY HANDLE ALL OVER THE INTERNET: I HAVE SEVERAL WEBSITES MYSELFLook it up on Google or Yahoo. I’m a Nuclear and Mechanical engineer by college training, but loved economics in college too. I’ve worked for private companies and do board work in management now too. I blog all over Business needs a technical scientific viewpoint; especially relating to the environment and our horrification with American overpopulation. All of us scientists think alike on overpopulation being the root cause of economic problems. The only workable solution in a scientist’s mind is depopulate.
hero • May 17th, 2009 at 7:52 pm
I follow military events closely and very familiar with the field.No way the US can maintain its military edge in the present fiscal crisis. The size of the military peaked in the 70′s and has been decreasing ever since.To give you a quick way to find its size & capabilities, look at the number of aircraft carriers…It used to have about 16, now only about 10.
The Alarmist • May 18th, 2009 at 2:29 am
Just saying that it is ‘catastrophic’ gives you away as a non-native-speaker 
It’s really not so bad, your english.
The Alarmist • May 18th, 2009 at 2:39 am
So, just to be clear on this … California is officially a toxic or troubled asset.Mark Steyn had a great line the other day … Arnie came as a penniless immigrant to a lend of plenty, and now he’s an immigrant with plenty in a penniless land.What makes the TARP solution really scary is the fact that the act would require California to continue spending recklessly in order to qualify and continue to qualify for handouts under the TARP.We were already well on the way to this sort of arrangement with revenue sharing. This just turbo-charges the process. The politicos of the various states know that if they actually had to go hat in hand to the people that they would be toast, so the take the back-door route via their generous uncle, which is fine except for the fact that the generous uncle has been raiding the kiddies savings accounts to continue the largesse.This is not sustainable, but to paraphrase Keynes, the system can be irrational longer than you and I can live. Shame for our kids and grandkids, though.
The Alarmist • May 18th, 2009 at 2:43 am
Gee, I feel really fortunate that I came of age in the Reagan years. I really feel for the kids being born nowadays.Argentina was once a first world nation, and few thought it would be what it is today. Few think this can happen to the US, but hey, there are only 300 million people there, and the rest of the world is eventually going to need to move on with business.
Lord Sidcup • May 18th, 2009 at 10:07 am
Surely the present chinese approach to information-freedom is untenable in the long term?Capital liberalizes everything.
Anna Viterbo • May 18th, 2009 at 10:09 am
BACK ON THE ISSUEChina’s currency is going to have an international role thanks to the Chiang Mai Initiative and to the pilot project recently launched with a group of neighboring countries for the use of the renminbi as the denominator of international trade transactions.Are we watching a smooth move towards a new regional leading currency (the renminbi), substituting the yen?
Guest • May 18th, 2009 at 10:44 am
WE can start with you.
Stormy • May 18th, 2009 at 12:22 pm
A couple of points:1. China and others can complain about the dollar’s reserve status, but they used that status to rapidly industrialize (via pegs to the dollar). That kind of currency manipulation is a two-edge sword: It brings quick wealth but it also creates dependency, in the same way that creating an export based economy creates the same kind of dependency. How China and others find a solution to these twin dependency problems will be the story of the next five years.2. Those who have played the export game to the U.S. will be looking for at least one more inning of the same, i.e., the bonanza that they hope the stimulus package will provide. Perhaps, they dream, it will create one last spending surge of the American consumer.3. For its part, the U.S. has no where to go–except to shrink. Having given up its manufacturing and export base in favor of cheaper goods from abroad.At one point, the import/export ratio was 2:1. That ratio will decrease and begin to balance. Our present economic mess is just the beginning of this rebalancing. Don’t look for a sudden corrective surge in exports. The U.S. simply cannot compete anymore…at least not until the last bit of fat has been wrung from our bones…and we are as lean and as eager as the Mexican illegals.I have asked this question a number of times: What will be the engine of the U.S. recovery? What are you selling?
AGolfer • May 18th, 2009 at 9:30 pm
This site is really curious. When the economy is “doing well” there are very few posts. It’s as if we like doom, and when there is no doom there is nothing really to say. An analogy – I live in the North East and the weather has been unusually cool so global warming is now not taken seriously. Maybe humans can only think about the immediate environment. Tomorrow is too far away.
Guest • May 18th, 2009 at 10:49 pm
Dear Professor Roubini,it sounds like you, Stephen Roach, Paul Krugman, and Jim Rogers are all essentially starting to agree on what needs to happen for the global economy to recover from this downturn. If governments around the world begin to take concrete action on the basis of your converging analyses, I strongly suspect the global economy will return to health later (rather than much later).
Guest • May 18th, 2009 at 10:53 pm
Whether they served together or not does not have any implications for the validity of their policy recommendations one way or the other.
Houhui • May 19th, 2009 at 8:51 pm
Unfortunately William Engdahl is a delusional German Nationalist… His “history” of the last 100+ years or so is based mostly on speculation, lacking any academic evidence, presents stupid consipiracy theories as fact (the CIA started the hippie movement!!!), ignores completely anything that Germany ever did to affect the behaviour of the US or the UK (WWII), or Russia for that matter, is extremely biased (UK wanted empire to dominate the world, whereas Germany’s imperial ambitions were based on the desire for mutually beneficial trade!) and misunderstands the oil trade.It was very popular in many “anti-US” countries though, there is even a Chinese edition. I don’t think this book was well received in the respected Academic world though.
houhui • May 19th, 2009 at 8:54 pm
The US manufacturing sector was STILL larger than China’s or Japan’s or Germany’s just one year ago. (and by some estimates larger than combinations of the next two) This myth that the US manufacturing sector has all moved offshore is simply not true. The Car industry will put a dent in this of course.
Sacrifice • May 22nd, 2009 at 11:34 am
HA! Don’t hold your breath.
