Thursday, January 16, 2014

Roubini vs. El-Erian: How Bad Off Is the Economy?

Bloomberg Television's "Lunch Money" Host Matt Miller reports on the global economy. (Source: Bloomberg)


The arguably more positive outlook about the US and the global economy implies that over time the Federal Reserve and other central banks will exit from quantitative easing and zero interest policy rates, which means that real rates will rise, rather than fall. With gold performing better in a zero or negative interest rate environment Roubini thus sees its attraction waning as interest rates start to rise.Roubini argues that some of the Central banks of the more indebted nations may be tempted to liquidate part of their gold holdings and thus further depress the gold market. He points specifically to Cyprus where a report that it might sell a small fraction -- some €400 million ($520 million) -- of its gold reserves may have contributed to triggering a 13% fall in gold prices in April. Countries like Italy, which has massive gold reserves (above $130 billion), he says, could be similarly tempted, driving down prices further Roubini comments..
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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