Roubini
Investors will be hit by the realization that many banks are bankrupt, that companies will have to rein in debt and sell assets and that emerging markets may get into trouble, Roubini said.
"I think that there's a 20 percent downside risk to US and global equities," Roubini told "Squawk Box Europe."The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that "banks are getting the money and they are hoarding it, they're not lending it," because they expect higher losses. The rise in the price of gold is a signal of fear that countries and corporations may default on debt rather than of worries about future inflation, and the precious metal is used as a "safety valve." "Certainly starting a war with China on the issue of the currency is very, very dangerous," he said. "The US is relying on the kindness of strangers -- Russia, China, the Gulf States … to finance a huge, and growing, twin current account and fiscal deficit," Roubini said.
"If China were to pull the plug on financing the US dollar, then we'd have a freefall of the dollar," he added.
Expected losses of about $2 trillion exceed bank capital of about $1.5 trillion, Roubini said.
Roubini had earlier said that total financial system losses could hit $3.6 trillion.
No comments:
Post a Comment