roubini

The Norwegian central bank is risking an asset bubble by keeping interest rates close to the US benchmark in order to contain krone gains and protect exporters.

So says Nouriel Roubini, NYU professor, and, more important these days, one of the few who correctly predicted the financial crisis. “Even in Norway there is no willingness to raise rates – despite inflation and robust growth – because of concerns about the currency. That means you are feeding real estate and other bubbles,” Mr Roubini told Bloomberg in Oslo today. Read more

Forget commercial real estate, the next shoe to drop is private equity. Apparently, private equity firms themselves are not the problem, it’s the companies they own, which employ some 7.5 million workers in the US alone. Private equity firms buy up struggling companies, aiming to turn them round and flog them off. The purchases are often highly leveraged using short-term loans, which are coming due. One estimate is that half of those companies will fail between 2012 and 2014.

Roubini argues further unemployment is on the way and Jeffrey Immelt, GE chief, has joined predictions of a second stimulus in the US. So the IMF’s speech this weekend was timely: Strauss-Kahn said the IMF should provide global financial insurance Read more

Lots of central bank news: the Bank of England extends QE by £25bn in what is seen as a “gradual decline” of the programme, and there are rumours that the ECB could begin exiting part of its stimulus as early as December. The Fed statement yesterday was largely unchanged.  Read more