Monday, February 25, 2008
New Doctor Doom?
Nouriel Roubini (NR), "makes the old Dr. Doom, bond pessimist Henry Kaufman, look like Dr. Phil. No mincer of words. Roubini thinks a full-blown panic will scorch the global economy. ... 'Cash is king in 2008,' says Roubini. ... Banks got hooked on off-balance-sheet entities like structured investment vehicles, which Roubini calls the 'shadow banking system.' But the shadow system has no access to the 'lender of last resort' support of central banks. When the banks tire of bailing out their SIVs, holders of SIV paper will have losses", Forbes, 25 February 2008.
I disagree with NR again. "Cash is trash", inflation's coming. As to bailouts, by hook or by crook, the banks will be able to discount SIV paper with the Fed. Bet on it.