Wednesday, January 16, 2013

Roubini: No Need to Panic Over Debt Ceiling, Yet

Nouriel Roubini : "In absolute terms, the United States has significant fiscal, growth and unemployment problems,""[But] paradoxically, if we don't reach an agreement in March on the fiscal debt ceiling and we get another downgrade, yields are going to fall, they're not going to go up. Everywhere else, if a country gets a downgrade, the yields go up, in the U.S. it is the opposite." Roubini said at a Reuters conference in New York on Monday , "We have low growth, we have low inflation below target, we have zero federal funds…in 2015, we're doing QE3 (a third round of quantitative easing), maybe QE4," he said. "Every time there is a global bout of risk aversion people go into the dollar and Treasurys," he said. "At the peak of the crisis, the dollar rallied because we are the safest," "Here you have five or six reasons why, in spite of large and unsustainable debt and the [political gridlock] the bond vigilantes are asleep at the wheel- and they're going to stay like that for a while." "Eventually the bond vigilantes are going to figure out that our debts are unsustainable [alongside those] in Europe, in Japan and in emerging markets and…Eventually, if we don't solve our problems, if we [still] have this dysfunctional political system, then the bond vigilantes are going to wake up, but not yet."-

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