World Clock

Friday, 19 November 2010

Roubini "kicking the can down the road" in Europe

Today saw Nouriel Roubini aka Dr Doom on CNBCs Squawk Box speaking about the on-going Sovereign debt crisis in Europe regarding Greece, Ireland, Portugal and what he refers to as the elephant in the room Spain. He highlighted that the 'bond vigilantes' have woken up to the European debt issue again after the first warnings were sounded back in the Spring of this year regarding Greece. Roubini then draws to attention America's growing debt crisis as states such as Florida, Illinois & Arizona are technically insolvent. 

Furthermore, reading between the lines Roubini goes as far as comparing Spain to California in regards to both been too big to fail and consequently too big to save. Spain which he calculates has approximately 2trn Euros ($2.7trn, £1.7trn) in liabilities, California on the other hand represents 1/7 of US economy.

In reference to US, he states the 'bond vigilantes' have not yet to woken up to the financial storm brewing in the US specifically in relation to its debt to GDP (currently at 94%) ratio and current account deficit (currently at $123bn. However this could be beginning to show up elsewhere such as the weakness of the US dollar, capital outflows from the US to emerging markets and/or the strength of the gold market. All of which draws attention to the weakening financial health of the US economy.


He is also critical of the IMF and the European Union in regards to their handling of the Sovereign debt crisis, since if you keep bailing out these smaller economies i.e. Greece, Portugal and Ireland then eventually you'll end up with a situation whereby Spain is the next country in line. 

This has created what he coins 'Super Sovereigns' which has the potential to generate far greater problems down the road, since if the crisis continues to deepen then the EU and IMF will eventually reach a stage where it is required to bailout the likes of Spain. Given the overall size of Spain's liabilities this will be practically impossible given the fact the IMF and EU does not have enough official money to carry this out.

That's unless of course either someone from Mars or the Moon underwrites the debt of the IMF and the EU.

Roubini's latest book 'Crisis Economics' can be purchase from

His website:

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