Nouriel Roubini: The Financial Crisis -1/5
Nouriel Roubini – who successfully predicted the recent collapse of the US-dominated financial system years in advance – discusses the financial crisis and its impact on world economies. He describes in detail: (a) the origins of the financial crisis in bursting of massive bubbles in various asset classes that in turn were generated by easy credit and poor regulation; (b) the fundamental flaws of limited transparency, excessive securitization, and shoddy credit ratings – especially in the domain of exotic securities – in the financial system; and (c) the fateful decision by Western financial regulators to allow the shadow banking system to grow dramatically without adequate safety measures. He also highlights: (d) the weakening of American geopolitical power from massive deficit spending to fix the US financial system and revive the American economy; (e) the potential threat to world peace through severe social and political unrest arising from high unemployment; and (f) the likely slowdown, if not reversal, of globalization itself via enactment of trade and tariff barriers to protect jobs. This speech was recorded in October 2008. PLEASE READ MY COMMENTS ON THE VIDEO BEFORE WATCHING.
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PART I:
I have tremendous respect for Roubini on account of his prophetic prediction of the financial crisis as well as his standing by his predictions despite ridicule from financial and economic elite. I agree that the current financial crisis (a) is the worst since the Great Depression and will have severe economic impact around the world, and (b) was brought about by bursting of massive bubbles (that had been fueled by easy credit and poor regulation) in a variety of asset classes.
-Kashif
PART II:
Roubini is correct to note serious flaws in the financial system via: (a) limited transparency, (b) excessive securitization, and (c) shoddy ratings. These flaws – especially in arena of “exotic” securities – have the potential to be fatal for the entire financial system. Non-transparency has led to investor panic, securitization has given rise to a fee-driven culture that unloads risks to others, while shoddy ratings has created mispricing and misunderstanding of risks.
-Kashif
PART III:
I find it very interesting that the shadow banking system (consisting of investment banks, hedge funds, non-bank mortgage lenders, special investment vehicles, etc.) was allowed to grow dramatically in size and importance without any adequate safety measures. By contrast, authorities focused on protecting the regular banking system with (a) deposit insurance schemes (to prevent depositor panic), and (b) lender of last resort schemes (to prevent a run on the bank).
-Kashif
PART IV:
The irony of the collapse of the US-dominated financial system, of course, is that it presages “the beginning of the end of the American Empire”. [Roubini's words]. The US now needs to undertake massive deficit spending to fix its financial system as well as jump start its economy. Since most investment capital can only come from historical adversaries like China, India, Russia, and petro-dollar states, the US will be forced to offer higher returns or geopolitical compromises.
-Kashif
PART V:
Equally ironic is the fact that the ongoing financial collapse – if mishandled – can put an end to globalization of the recent decades. Worse, it can even lead to major wars! As per Roubini, history of WW II is a sobering reference: stock market collapse led to a banking crisis which led to an economic crisis; the economic crisis gave rise to authoritarian regimes which engaged in trade protection; trade wars then led to capital controls… which ultimately led to a global war.
-Kashif
The Jewnited Snakes of Amerikkka is nothing but a Bunch of Satan Worshiping Crooks. They’ve come into existence via. Kidnapping (African & Native American Slaves), Extortion, Robbery, Mass Serial Killing, Racial Hatred, etc., etc., and have Broken every Law that they’ve set up in their own Criminal, Criminal Justice System. I say Criminal, Criminal because they’re Criminals themselves that Run it. “The Whore of Babylon have Fallen”.