When someone shares with you something of value, you have an obligation to share it with others.
Monday 13 October 2008
Roubini Argues for Further Rate Cuts
Nouriel Roubini, the professor who predicted the financial crisis two years ago, believes world financial officials should orchestrate interest rate cuts of at least 1.5 percentage points to help avert a depression. PDF
Nouriel Roubini, the professor who predicted the financial crisis two years ago, believes world financial officials should orchestrate interest rate cuts of at least 1.5 percentage points to help avert a depression.
A temporary guarantee of all bank deposits, unlimited liquidity for solvent financial institutions and fiscal stimulus measures were also needed, the New York University professor of economics said in a commentary to Roubini Global Economics subscribers on Friday.
"It will take a significant change in leadership of economic policy and very radical, co-ordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster," he said. From late 2006, Roubini highlighted the dangers of a likely US housing crisis.
The economist urged immediate action as officials from the International Monetary Fund, World Bank and Group of Seven nations meet in Washington this weekend.
Stocks tumbled around the world on Friday as the credit crisis deepened, sending Japan's Nikkei 225 stock average to its worst weekly drop in history. In the US, the Dow Jones industrial average fell below 9 000 for the first time since 2003 on Thursday. More than $4 trillion (R36.5 trillion) was erased from global equities in the week.
"At this stage, the risk of an imminent stock market crash like the one-day collapse of 20 percent plus in US stock prices in 1987 cannot be ruled out," said Roubini. "The financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and investors have totally lost faith in the ability of policy authorities to control the meltdown."
In a co-ordinated emergency move on Wednesday, the Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank cut their benchmark rates by half a percentage point.
Roubini proposed "another rapid round of policy rate cuts of the order of at least 150 basis points on average globally".
Officials are trying a range of approaches. US treasury secretary Henry Paulson plans to buy stakes in banks, UK chancellor of the exchequer Alistair Darling wants guarantees for lending and German finance minister Peer Steinbrueck is pushing for greater regulation.
Roubini proposed an agreement between countries with current account deficits and those with surpluses to maintain orderly financing of deficits and "avoid a disorderly adjustment of such imbalances".
The world was experiencing the simultaneous bursting of housing, equity, bond, credit, commodity, hedge fund and private equity bubbles, he said.
The threat of a global financial meltdown meant a decade-long "L-shaped" recession could not be ruled out, said Roubini. As demand fell, the next challenge might be deflation as the world faced a glut of excess capacity and goods, he added.
1 comment:
Roubini Argues for Further Rate Cuts
By Kevin Hamlin
12 October 2008
Nouriel Roubini, the professor who predicted the financial crisis two years ago, believes world financial officials should orchestrate interest rate cuts of at least 1.5 percentage points to help avert a depression.
A temporary guarantee of all bank deposits, unlimited liquidity for solvent financial institutions and fiscal stimulus measures were also needed, the New York University professor of economics said in a commentary to Roubini Global Economics subscribers on Friday.
"It will take a significant change in leadership of economic policy and very radical, co-ordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster," he said. From late 2006, Roubini highlighted the dangers of a likely US housing crisis.
The economist urged immediate action as officials from the International Monetary Fund, World Bank and Group of Seven nations meet in Washington this weekend.
Stocks tumbled around the world on Friday as the credit crisis deepened, sending Japan's Nikkei 225 stock average to its worst weekly drop in history. In the US, the Dow Jones industrial average fell below 9 000 for the first time since 2003 on Thursday. More than $4 trillion (R36.5 trillion) was erased from global equities in the week.
"At this stage, the risk of an imminent stock market crash like the one-day collapse of 20 percent plus in US stock prices in 1987 cannot be ruled out," said Roubini. "The financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and investors have totally lost faith in the ability of policy authorities to control the meltdown."
In a co-ordinated emergency move on Wednesday, the Federal Reserve, European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank cut their benchmark rates by half a percentage point.
Roubini proposed "another rapid round of policy rate cuts of the order of at least 150 basis points on average globally".
Officials are trying a range of approaches. US treasury secretary Henry Paulson plans to buy stakes in banks, UK chancellor of the exchequer Alistair Darling wants guarantees for lending and German finance minister Peer Steinbrueck is pushing for greater regulation.
Roubini proposed an agreement between countries with current account deficits and those with surpluses to maintain orderly financing of deficits and "avoid a disorderly adjustment of such imbalances".
The world was experiencing the simultaneous bursting of housing, equity, bond, credit, commodity, hedge fund and private equity bubbles, he said.
The threat of a global financial meltdown meant a decade-long "L-shaped" recession could not be ruled out, said Roubini. As demand fell, the next challenge might be deflation as the world faced a glut of excess capacity and goods, he added.
Post a Comment