Roubini Discusses Gold, Trade Deficits, The Exit Strategy And China

Tyler Durden's picture

Roubini was on Bloomberg TV earlier discussing the key daily topics of the past month, which include the trade deficit, the Fed and its exit strategy (ZIRP in perpetuity is a strategy), China, and gold. Of course, with Primary Dealers and math Ph.D. fully in control of the no-volume market now, and having absolutely no interest in issues such as geopolitics, economics, finance, or basic supply and demand and mostly interesting in how to front run block orders in exchanges and darl pools, nothing that Roubini or anyone else has to say will have any bearing on the market for as long as the volumeless melt up persists, days like today being a shining example, where news of potential Middle East war are enough to bring the market by about 2 basis points. 

On Gold:
“Well, in my view, gold is not going to rise to the levels $1,500, $2,000 the gold bugs argue because gold tends to sharply rise only under two conditions. Either there's a significant increase in inflation - and in US, Europe, Japan, we worry more about deflation than inflation. Or gold rises when there is really risk aversion like after the collapse of Lehman or a year ago when the banks US looked like borderline insolvent. So we have avoided the tail risk of a near depression. So gold prices shouldn't go higher. And for now, there is more deflation than inflation. So for the time being, I see gold in a very narrow range, not shooting up much higher than current levels.

On the current trade deficit:
“Well, first of all, the widening of the trade deficit implies that in the first quarter, net exports are going to be a negative contribution to the negative growth. It's true that consumption growth for the first quarter might be close to 3 percent. But I still expect a growth rate for the first quarter of about 2.5 percent below trend, because if you look at the other components of aggregate demand, net exports are contracting, fixed investment is anemic because both residential and non-residential investment are still falling. CapEx spending is growing only anemically, and government spend is not going to be a significant contribution to economic growth.   So when you add all the components of aggregate demand, we still get the growth rate of barely 2.5 percent. That is even below a potential growth rate of 3 percent. This at a time where the policy stimulus is still at the maximum. But the second half of the year as the policy and stimulus wanes and the restocking stops, then we're going to have even lower economic growth, closer to 2 percent. That's the scenario of an anemic, subpar, below trend, U shaped recovery.

On whether the Fed should craft an exit strategy:
“Well, for the time being, the Fed is saying they're going to keep zero rates for the foreseeable future. That's not going to change. In my view, the Fed funds are going to stay at zero until at least the first quarter, if not the second quarter, of next year, given we're going to have anemic economic growth, and we'll have more deflation than inflation. And the Fed might try to start mopping up some of the liquidity. But I think that actually chances are they're going to resume further quantitative easing, because if they're going to have a backup in mortgage rates or ten year treasuries, the last thing that the Fed can afford in an election year is having a crowding out of the recovery of housing that is already an (inaudible) recovery during an election year. So if a backup in yield were to occur and mortgage rates go higher and higher, the Fed is going to eat its own words, reverse what it said, lose some reputation, and resume further QE directly or indirectly. They could use, for example, Fannie and Freddie as a way of effectively backstopping the mortgage market.  So I see zero rates and maybe more QE rather than less QE.

On China:
“Well, they're going to do it only gradually. In the best of all worlds between 2005 and 2008, they would allow only a 6 percent appreciation of the yuan relative to the dollar when they were growing much faster and they did not have employment problems. Today they're growing more slowly, exports fell, the recovery is anemic. Therefore, they're going to let the maximum, in my view, 3 percent to 4 percent of their currency per year. Something that's going to allow at least the U.S. to signal there is some movement, and prevent the U.S. from declaring China as a currency manipulator. But the pressure is on us.”

As for the market, the PDs will not stop until they finally get retail investors to capitulate and start buying up the banks massive stock holdings whose prices have surged primarily due to shell games among the various Fed representatives on earth, in which each one bids up (with massive leverage) the stocks of everyone else, and vice versa. The only question is whether they can sucker enough retail investors to offload their prop holdings to, recall that mutual funds are now out of cash, before they take the market down. In the absence of retail animal spirits, the market will continue to melt up as the PDs do everything in their power to make the market a travesty of valuations representing underlying cash flows.

Part of Bloomberg Roubini clip:

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Frank Owen's picture

lol, that video certainly didn't move me to put it on my "places to see" list.

added: hope you didn't think Ballinspittle was the first of my trifecta. hehe

merehuman's picture

Dogs, shotguns and good neighbors. And a surprise for those who get past me. But thanks for the heads up. Surely the government stooges will drool.

Frank Owen's picture

good neighbors... The area where I and most people live would turn into mayhem if the grocery stores were closed for a week. You know what's fucked up? I am fairly well stocked, and i know no-one around me is, but if the shtf there is no way i could hoard food and watch people around me starve so I would be supporting them with my foresight because not helping people is a life not worth living as far as i am concerned.

Hulk's picture

Thats's part of the prep though, providing a little something for the neighbors. No plan is complete without it.

merehuman's picture

Frank Owen here is a mantra for you fron an ex buddhist ex eckist ex human




THE DORK OF CORK's picture

Rusty does that mean you hold 57333 ounces in your possession and we have just 1694 remaining !

or are you a representative of the Bank of England and you are telling us that the banks silver reserves are not very substantial

Rusty_Shackleford's picture

Sorry.  Misunderstood the concept.  Holding 1694 in physical.

Frank Owen's picture

1694?! You're the guy who bought that bank aren't you? Rusty Shackleford my ass, more like Silver Shackleford!

BlackBeard's picture

Now my ZH homepage banner ad is for cougarlife.  Much better IMO.  Just waitin' for a good Russian bride sponsor to show up.

Bam_Man's picture

No, wait for the Ukrainian bridal agency ads.

They are the really good ones.

Bam_Man's picture

For all his obvious intelligence, Roubini clearly does not understand the first thing about Gold.

Either that or he has become just another Fed/JPM/GS stooge.

ZackAttack's picture

Ah, he got his 15 minutes, got to nail some hot chicks, sign up for some big $ speaking engagements. Life is good, for him.

ZackAttack's picture

banks massive stock holdings whose prices have surged primarily due to shell games among the various Fed representatives on earth, in which each one bids up (with massive leverage) the stocks of everyone else, and vice versa


Another Japan parallel... remembering how the keiretsu held each others' stocks at par year after year.


What we have is a virtual keiretsu.


wstrub's picture

Looks like he has been bought and paid for.  Somebody got to him.

Gordon_Gekko's picture

Unfortunately, he's nothing but a two-bit bankster minion now.

Greenhead's picture

This is dated but to the point:


Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.


lsbumblebee's picture

I wonder how Roubini would define "significant" inflation, and if in his opinion it occurred between 2001 and 2009, when gold rose almost $1000, from $255 to $1212 an ounce, even in the face of incredible downward manipulation.

THE DORK OF CORK's picture

He looks to me as if he has Soros of the liver - perhaps to many late nights in the company of The King of Speculators has vaporised his brain cells as well.

GFORCE's picture

He's saying that there will not be high inflation in the near term and that the system is fixed. I believe the first but I think he's wrong on the second. Time will tell.


SgtShaftoe's picture

I followed Roubini before he was cool, back before the housing bubble burst and everyone in the media laughed at him.  It's amazing how being proved correct can destroy one's future credibility.  He used to bring some valuable insight, unfortunately now he is indeed a puppet.  He sure does know how to party though! 

Gordon_Gekko's picture

When the end comes, it will be a surprise even to those who expect it.

The likes of Roubini will forever be relegated to the dustbin of history.

GoldSilverDoc's picture

You know, for the life of me, I will never understand why any of these dopes opens his mouth and removes all doubt.

VFR's picture

fiat money has lots of uses. I couldn't imagine gold will ever sink toi this level.

yabs's picture

he has sold out recently
bei ng paid to say the FED saved the day from a near depression
never heard such shite in all my life
sad thing is though people DO think that the policies have worked. Thats the scary part

deadparrot's picture

The melt-up can't last forever. It's not doing its job of pulling in dumb money. It only takes one player to cash in his chips to bring this game to an end.

sheeple's picture

Either there's a significant increase in inflation - and in US, Europe, Japan, we worry more about deflation than inflation.

Hey brainchild, how about that 100-1 leverage?


Or gold rises when there is really risk aversion like after the collapse of Lehman or a year ago when the banks US looked like borderline insolvent.

Hey PHD, I thought silver and gold PLUNGED when Lehman collapse


And for now, there is more deflation than inflation

my wallet ain't agreeing with that statement


They could use, for example, Fannie and Freddie as a way of effectively backstopping the mortgage market.

Translation: "We are you going to fuck taxpayer over."


Today they're growing more slowly, exports fell, the recovery is anemic.

Clearly he doesn't know sheepshit about China




Sqworl's picture

Clearly you are a sheeple, he met with Wen last week in China...Who did you meet with last week your parole officer??? loser!

DosZap's picture

He's (sheeple) definitely is correct about inflation.

The increase in food prices from just 6mos ago, is UNFRICKEN REAL.

Eggs, were $.89dz Grade A Lg, now?.Try a $1.89!,Bread, $3.00 a loaf.........

Fuel, up $.50-$.75 a gallon, OJ $4.00gal, Milk $3.00gal,worst of all, the fkrs are selling same size pkgs, with LESS oz's, for SAME price..........

That's INFLATION.......any way you cut it.

These Frkrs are on crack, NO inflation.

Try living were the real people do.

The only thing DEFLATED is the dollar, and the Job Mkt...................all on purpose, and by design.


Bow Tie's picture

food prices definitely up. any idiot can see that. i don't see how anyone can see deflation in the cost of living. maybe some imaginary indexes...

my food inflation observation of the week - copella apple juice 'NEW' size just launched - 750ml (previously 1 litre bottle). about 5% cheaper.

Segestan's picture

This link is an example of fraud....


 They will pay you money for you're old scrap Gold. Rather it should read.. They will give you fiat scrap for you're money(gold)

verum quod lies's picture

Sheeple, good catch on the price action on gold after the Lehman event.

We must remember who Roubini is and what he actually identified earlier than most. First, what he identified (lest we forget, that is, along with Brad Setser, who doesn't seem to whore as much for the camera): They identifed that (A) running a trade deficit for several decades would probably cause problems, and (B) it probably couldn't keep increasing, especially at an increasing rate. Yes, this was economic insight at its greatest (though it did run smack against conventional economic wisdom). As far as I know, he did not specifically identify that which triggered the 'financial crisis' itself, namely too much f_ing debt. Second, as to what he is: he is a f_ing Keynesian. For example, his probable proposed solution to a skin scrape is more government.

Finally, he clearly lacks any understanding of primary drivers of PM prices, specifically gold. One of the primary drivers is the 'real rate of interest' (as a refresher, the price if inversely related to it). Thus, when the real rate is low, the price tends to go .... wait for it, .... uuuup, but not always. Therefore, he thinks the Fed will keep the real rate low to negative, yet there is no upward price pressure on gold? This alone tells me he is a financial moron, and I am ignoring the currency substitute aspect of the shiny metal (which I personally think is more important) and other drivers.

What we have here is a man who has found his 1,500 minutes of fame, and fortune, and no longer feels the need to think through much of what his hole spouts out.


jimmyjames's picture
by yabs
on Tue, 04/13/2010 - 12:27


gold does not always go up with inflation
thats BS
It goes up when there is a loss of confidence in the system


It also goes up-without going-up-in price--

As assets decrease in price-and-they will "eventually" be forced down by the market-in deflation and high global unemployment--

Gold should increase in buying power-as prices fall beneath it-like what happened in the 30's-

Money is always king in deflation-just make sure-your not holding the wrong kind of money--

trav7777's picture

going to need significant loss of faith in FRNs to displace them.  The Euro collapsing would do more for gold than the dollar

Lord and Master's picture

I have a 150 IQ, have a better education than Nuriel, and am skeptical of someone who lectures on Economics in the English language, but who cant say the word "quantitative".  His first attempt results in "quantitive" and thereafter he shies away and says "QE".  Granted there is a lot of math involved in economics, but you need to have at least quality verbal skills (because they are connected to social understanding and fluency), when you are opining on the direction of the country, of the world.  

Most people, however, have math issues that prevent them from getting a good idea of economic situations.  I think 90% of people repeat reasonable sounding opinions they hear on the economy, but cant get beyond that to any kind of decent understanding of the economic issues facing the nation/world, because their basic math skills aren't great-- or better put, their sense of the comparative scale of numbers is poor.  E.g., people dont understand what a joke the budget deficit numbers are-- i think all discussions of america's future pretty much come down to the fairly simply statement- "its the deficit, stupid."  (i.e. "America is toast... its the deficit, stupid.").

re. gold/silver.  I think the price of gold probably should get to something like $100,000/oz.  That would make sense to me at some point down the line.  $5,000 in next few years sounds reasonable.  Think about an ounce of silver being $18.  Thats a 12 minute cab ride in NYC.  There are 6 billion people in the world, silver is in very limited supply... a cab ride for an ounce seems like a huge mispricing.  Another interesting thought experiment is this -- i believe there are 5 billion above-ground ounces of gold in the world (that figure could be off somewhat).  There are 6 billion people.  If one considers gold the only real money, more or less, and you wanted to split up all the gold in the world evenly, everyone would get an ounce.  So if we leveled the playing field in that manner, you could speak (in some sense) of everyone's cash wealth being 1 ounce of gold.  So if you own n = 10 ounces of physical gold, this could be thought of as 'owning' n - 1 = 9 people.  That is why I wrote Nuriel's mom's name ("Ronit") on one of my maple leafs-- i heard she is 100% in treasuries & cash.

merehuman's picture

You sound nice, it was a good read, but whats an I.Q. ? and where do i get one.

Matto's picture

If you do one of those online short IQ tests they make it real easy and give you bonus points. Its well worth going down that path if you want to get one.

Lord and Master's picture

Mere human "merehuman": I dont know what I.Q. is-- your term(?)  Presumably something interesting maybe?  I notice your expression contains the same two characters of the term i used - i.e. IQ, though your term (presumably?) means something different than mine (?)  Mine is my sort-of shorthand for Idiopathic Quorum- my own personal expression for a (presumably?) sufficiently numbered body of decision-making entities (people?, computers?) which generally enacts laws, rules or sets in place an appartus from which actions are effected, when the etiology of said sufficiently-numbered body is not immediately obvious, or not immediately palpable to the senses of more necessary decision-making entities (people? mousetraps?).  A number can be found in Washington, District of Columbia, Cf. Congress, Senate Banking Committee.  But whats this I period Q period you speak of -- Im so sure its really interesting, weed. 

merehuman's picture

I like weeds. And its all the smart ones that got us here. So you might understand where i am coming from. I took your statement as an arrogant braggart of supreme intelligence. Someone who lives in their head more than their heart. If i am mistaken, consider this an apology.

If not, up your bucket. Me , i think you are too smart for your own good.

Bow Tie's picture

didn't gold go up $50 in one day last time the fed made some type of QE based announcement. i doubt POG will remain stable and at these levels when QE2.0 is launched. bernanke is gonna be firing blanks...

merehuman's picture

Bow Tie, I could have sworn Bubble boy has been firing blanks all along

johngaltfla's picture

Roubini has to talk gold down or he doesn't get his grind and pelvic rubs on with those hot chicks at the "chic" NYC parties.

Plus he has no clue about the ideas of desperflation. None that he would discuss publicly at least.

Sqworl's picture

Johnny: Gold ain't got nutting to do with his getting his grind with the hottest chic's on the globe!  The guy is a major stud and when not supermodels, most of them areeconomists, bankers and recent MBA grads...they know the real

And I believe the clueless one is you!!!  


GottaBKiddn's picture

The Roubman is simply not good enough to be

presented in the ZH halls of truth and wisdom.

Give the poor guy a break, he obviously has been

educated beyond his intelligence, and shouldn't have

to be responsible for this econ-drivel. Read the 

numbers on silver certificates, silver dollars, gold

coins, what have you, and the whole discussion of

inflation/deflation is moot. Even a child can make

this call. The man is simply a shill. Next.

bad craziness's picture

I'll bet this dumb fuck an ounce of pure its over US$2000 by end of 2011.  How do I get his sweaty mit into mine on that one... any ideas?

mwmolloy's picture

"in US, Europe, Japan, we worry more about deflation than inflation."

That sentance says it all, why you should be worried about inflation.  This is what guarantees inflation....