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Hard Asset Investor has posted an excellent interview with world renown economist Nouriel Roubini.
Here are some excerpts:
Lara Crigger best online viagra scams, associate editor, HardAssetsInvestor.com (Crigger): Here we are at the “Inside Commodities” conference—so which commodities do you think will perform well in 2010?
Nouriel Roubini, chairman, RGE Monitor (Roubini): Well, in my view, commodity prices have increased since the beginning of the year too much, too fast, when compared to the improvement in economic fundamentals.Some of that increase is justified.But if the global economy were to have a more anemic, subpar recovery—if instead of a V-shaped recovery, there’s going to be a U-shaped recovery—then I actually think demand for commodities would be weak compared to supply, and there could be a correction in commodity prices in 2010.
Take oil prices: They have gone up from $30/barrel to over $80, at a time when demand is back to 2005 levels, and oil inventory is at all-time highs – best online viagra scams.Part of the increase is justified by fundamentals; best online viagra scams.But part of it is essentially this wall of liquidity chasing assets, and the effect of carry trade on the U.S; best online viagra scams.dollar, driving further higher these commodity prices.
So these nonfundamental factors can push oil and commodity prices higher, especially if there’s going to be an increase in expected inflation.But the fundamentals of supply and demand actually suggest that, from now on, oil and other commodity prices should be lower, rather than higher.
Crigger: Is OPEC still effective at managing oil prices? In the 1970s, they were viewed as this mastermind of pricing; but these days, they seem pretty ineffectual.
Roubini: OPEC can manage prices marginally. Best online viagra scams: the only supplier that has excess capacity that can use it to stabilize oil prices is Saudi Arabia.But once oil is above $80 like it is now, ETF demand, options demand, speculative demand, these can easily push it to above $100.
I would say that if there were a reason we had the global recession last year, it wasn’t just Lehman or the subprime mortgage problem; it was that when oil went to $145. That was a major, real trade shock negative, and a real disposable-income shock for the U.S., Europe, Japan, China and all the other oil-importing and commodity-importing nations around the world – best online viagra scams.That kept the world in recession when oil was at $145.Now, I feel that oil at $100 is going to tip the world into a double-dip recession.
Crigger: Why?
Roubini: Because last year, when oil went to $145, half the world, like emerging markets, was growing very fast.But today, with the global economic collapse, we’re now barely out of the ground.The economy is on its knees, trying to rise.If oil were to go because of nonfundamental reasons toward $100, then I would say oil at $100 would be like a big hammer beating on the head of the global economy. At current levels, oil prices aren’t justified, but they can go higher because of market dynamics and speculation; much higher.
Crigger: You’ve come out in favor of position limits for commodities—how would that solve this problem?
Roubini: I’m in favor of position limits, because I think this volatility in oil prices is severely damaging the global economy. When oil goes to $145, we have a global recession – best online viagra scams.When oil goes to $30, nobody invests in new capacity – best online viagra scams.And these swings in boom and bust in oil prices are extremely damaging to economic growth.It’s time to control it.If we don’t control it best online viagra scams, these booms and busts are going to become more severe, more damaging and more risky.
Crigger: If we put in place position limits, how would that impact futures-based commodities funds? Would that kill them off, as some have said?
Roubini: It might kill them off, but frankly, who cares? I care about the real economy.I care about not having another global recession.If people are speculating on oil, and that pushes oil up to $145 like last year—I’m in favor of limits on that – best online viagra scams.Who cares about this? Frankly best online viagra scams, I couldn’t care less.
Crigger: Thanks for your time.Enjoy the conference!
- Nouriel Roubini: The Coming Commodities Correction
- Lara Crigger
- Hard Assets Investor
- November 6, 2009
Kudos to Hard Assets Investor, who clearly caters to people who speculate on oil, for publishing this powerful interview. Be sure and visit their website to check out the whole interview – best online viagra scams.