Thursday, November 12, 2009

Nouriel Roubini warns of dollar bubble

The worst may be yet to come.

Investors are shorting a falling US dollar to fund speculation in risky assets observes Nouriel Roubini in the FT. Around the world and across the board, the price of risky assets -- equities, commodities, emerging market asset classes and credit instruments --  is rising on the account of investors' ability to profitably leverage bets against the US dollar.  

But the dollar cannot continue falling forever, and its tradictional function as a safe-haven suggests that it could rise suddenly if an international crisis develops. Roubini warns, " . . . one day this bubble will burst, leading to the biggest co-ordinated asset bust ever. . . .  A stampede will occur as closing long leveraged risky asset positions across all asset classes funded by dollar shorts triggers a co-ordinated collapse of all those risky assets.

Roubini expounded further on the "comming commodoties correction" in a recent interview.

1 comment:

  1. compared to the rest of the world, the usa dollar is still more stable..EVEN with their current scenario.

    consider this..

    in the last century, MOST countries in the world changed their currency directly or indirectly via regime change or inflationary concerns.

    and each time countries did this, they essentially said goodbye to all their previous debts.

    china did this 3 times in the last century. germany, japan, mexico, france, etc. when you really think about it all the EU countries did this not 10 years ago.

    the only countries that I know of who didn't engage in this were the usa and britain.

    hell go ahead. take your money out of the dollar. go put it in the EU, or china.

    just remember.. if the EU collapses, or china decides to tell everybody to fu#k off like they did in 1949...


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