By Dominique de Kevelioc de Bailleul
What Zerohedge stated is a “must watch 9 minutes of reality,” Dr. Doom Nouriel Roubini, Monday, broke the bad news about the global economy to Bloomberg News. That day, the day that everyone has been hoping to avoid is now unavoidable. No later than 2013, the world will know how hard the collapsing Ponzi scheme will crash, which, according to him, will be much worse than 2008, if that can be imagined following nearly seven decades of successful central banking policy maneuvers.
But first, Roubini discussed the historically-rooted social/political implications of the next crisis. Since the beginning of recorded historical events, money changes have been a root of social decay, crime, political oppression, revolutions and wars. In the end, reforms and a new start are made, but not until revenge is exacted on the scourge of society—the bankers.
“Bankers are greedy; they’ve been greedy for the last hundreds of years,” said the 53-year-old self-described “global nomad.” “It’s not a question if they are more immoral today then they were a thousand years ago, you have to make sure they behave in ways in which you minimize those risks.
“One way of doing it is to separate activities, so you minimize the conflicts of interest,” he added. “Otherwise, this thing is going to happen over and over again.”
When asked for his opinion about the best way to manage banker greed, criminal activity and immoral behavior, Roubini didn’t mince words, a refreshing departure from comments made by analysts dependent upon the Wall Street/Washington circle of friends for a paycheck. Criminal behavior should be punished through appropriate and sanctioned criminal proceedings, according to him. That assessment comes following Barclay’s ‘crime of the century’, in which, it appears no one will be criminally prosecuted for jury rigging an estimated $100 trillion worth of debt securities marked to LIBOR+.
“Well, they [jail sentences] should occur, because no one has gone in jail since the global financial crisis for any of these things,” he said in a matter-of-fact manner. “The banks do things that are illegal, at best, a slap you know, a fine. Some people will end up in jail, maybe that will teach a lesson to somebody. Yeah, or maybe someone hanging on the streets.”
As far as the media and ‘official’ portrayal of the crisis, it’s all propaganda, cover up and lies, according to many financial analysts led by ‘On the Edge’ host Max Keiser, Euro Pacific Capital’s Peter Schiff, economist Marc Faber and commodities trader Jim Rogers. Roubini strongly agrees with these men.
“Things have become worse, not become better,” stated Roubini, in direct contradiction to senior ‘officials’ at the European parliament and a complicit media from both sides of the Atlantic. “Nothing has changed.”
After the European summit and the ECB’s cutting of policy rates, the yield on the 10-year Spanish note is back above seven percent. “Nothing has changed,” Roubini stated, again. The summit was a failure and the ECB’s policy move to cut interest rates had no effect on the market, according to him. After the knee-jerk reaction of lower yields for Spanish and Italian notes of a week ago, the yields are back above the seven and six percent, respectively—a warning sign of another Greek-like sovereign debt collapse could be imminent if not attended to quickly.
Unless a “bazooka” is deployed to the problem in the eurozone, Roubin added, “you’ll have a worse crisis, not six months from now—you’ll have another bigger crisis in the next two weeks.”
Roubini said the only way to stop the crisis is for the ECB to embark on “debt monetization,” a drastic and political third-rail issue among the core member nations of the eurozone: Germany, Holland, Austria and Finland. Moreover, each of these nations also must overcome legal hurdles before a political decision can be made to allow the ECB to mimic the U.S. Federal Reserve’s monetization of U.S. Treasuries—an action the Fed incredulously denies.
On the question of where to find shelter before the European crisis moves from a “slow-motion train wreck” to sudden collapse, Roubini avoided the question, an interesting omission to witness for the gold bugs and other hard money advocates such as Goldmoney’s James Turk, Sprott Asset Management’s Eric Sprott, and the folks at GATA.
Roubini summed up the “perfect storm” as he sees it, delineating the major issues that will most likely overwhelm central bankers and politicians in coming months. Incidentally, Jim Rogers has gone on the record that he, too, expects 2013 to be the year the global financial system cracks wide open.
Roubini’s concerns, of which he sees trouble brewing:
1) Slow-motion or fast motion train wreck in Europe
2) U.S. economic stall to the next leg down in the Depression
3) China landing harder rather than softer
4) Emerging markets (BRICS) sharply slowing in growth
5) Geopolitical time bomb of war between the U.S., Israel and Iran
In 2013, chances are the U.S. will decide to attack Iran, “doubling” oil prices overnight, said Roubini. “So, it’s a perfect storm,” he said.
“Next year could be a global perfect storm,” he added. “It’s much worse” than 2008. Policymakers have run out of “policy rabbits to pull out of the policy hat.” There is no “safety net” left to the system.
One day everyone will wake up and figure out that, it’s a “problem of solvency, not liquidity,” but then the damage will have already become apparent via a deeper Depression in Europe and the United States.
Roubini also predicts a complete breakup of the eurozone within five years.