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.

Copyright (C) Long Lake LLC 2010

Treasuries Rally

The accompanying chart of the 30 year T-bond shows a rapid collapse in yields concomitant with the collapse of the euro. The current implied yield per Bloomberg based on Asian trading is 4.21%. The yield a mere 6 weeks ago was over 4.8%: quite a drop.

There is first support/resistance at 4% even, seen in summer/fall 2008 and then fall 2009. (Click on chart to enlarge.)

Despite the make-believe nature of Federal finances, I am long various zero-coupon Treasuries based primarily on the ongoing structural bull market in Treasuries of all securities and would look to be a seller of the longest maturies if rates approach 4%.

The selling in certain stocks is looking just a bit panicky. Jim Rogers is fessing up that the collapse in the euro has taken him by surprise. He doesn't admit to being wrong often. He must have company.

In the meantime, the Gallup polling is showing its best hiring/not-hiring result in over 1 1/2 years at +10. This is still a level not consistent with a declining unemployment rate, however, given ongoing population growth and the ongoing disappearance of companies that no longer get sampled. The trend is OK, though, and while many stocks have horrible 2-year and longer-term charts, others such as several highlighted here over the past months and year remain in record territory, above their 2007/8 highs, have simply corrected overbought conditions from 1-2 months ago, and are looking fundamentally and technically ready for a bounce.

Companies that do little or no business in Europe may be best amongst these.

Copyright (C) Long Lake LLC 2010

The U. S. Dollar "Rally" Is Phony

What US dollar rally? (Data through Jan. 20)

Basically the Euro is tres weak now due to Greece and other troubled members of the EU, and the yen ain't so hot fundamentally either.

Copyright Long Lake LLC 2010