Thursday, June 10, 2010

Roubini Wants More Money Printing to Solve the Problem of Too Much Debt He Foresaw

Because it has led to surging employment and GDP growth in the U. S. (not), Nouriel Roubini is advocating the same for the European Central Bank:

The European Central Bank should reduce its benchmark interest rate to zero and expand government bond purchases to offset the recessionary effects of euro-area austerity measures, New York University economist Nouriel Roubini said.

“That has to be the policy mix: tight fiscal, but much more easy money, looser monetary policy, more quantitative easing and also a weakening of the euro,” said Roubini, who predicted the financial crisis, in an interview in Rome today. . .

“Going to zero alone is not going to be enough, it’s 100 basis points,” Roubini said. “They need to go to zero, they need to do more quantitative easing, they need to support dysfunctional markets, they need to signal that they are actually not uncomfortable with a weaker euro as long as that is a gradual and orderly process.”

Yet Roubini professes to believe in Austrian economics.

Sounds like the enabler of an alcoholic who "believes" in AA, but just not now.

In the meantime, has anyone noticed that the euro came out at $1.18 and is right around there now? Maybe all this gyration vs. the USD has accomplished little except siphoning real resources into the pockets of financial intermediaries.

Less debt, more equity, fewer side bets (various swaps), less ad hoc government intervention with the economy and much less porno viewing in government regulatory agencies, and then markets and the economy can mend. Penalizing savers as Dr. Roubini recommends does not help matters. He got things right prognostically a few years ago. But sometimes the doctor who makes a brilliant diagnosis gets the treatment wrong.

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