Roubini: “Global Perfect Storm” Leads to “Hanging Bankers”

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.

Greece “Officially Defaults” March 23, Banks Close

Wonder why European leaders appear more like a rotating cast of bumbling 3 Stooges than a team of coordinated fraternal bureaucrats throughout the debt crisis in Greece?  British investigative reporter John Ward of The Slog may have shed some light on to the matter of Greece and the strategically planned hard default of the beleaguered nation’s financial obligations at the close of business March 23. Sign-up for my 100% FREE Alerts

According to Ward, that following Monday, the 25th, Greek banks will close, then presumably usher in the drachma in addition to the shock, confusion and panic expected in markets to the surprise outcome of the two-year long display of alleged unity between France, Germany and other monied parties to solving Greece is revealed to be just a ruse, a delay tactic for a preparation of the event.

“A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January,” Ward begins his blog post of the morning of Feb. 16.  “The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that – at least at the time – the plan represented ‘a timetable, not a contingency’. The plan gives a firm date of March 23rd for default to be announced after the close of business.”

Ward makes a compelling case for a backdoor arrangement made between Germany, IMF and the U.S. to take matters into their own hands for saving the global banking system has been the plan all along.

One of Ward’s ‘protected’ sources was quoted as saying, “I have strongly suggested to Greek business friends and clients that they sell up fast, do a sale and leaseback on property, empty bank accounts, and change to a hard currency.”

If Ward’s information is indeed accurate, others closer to the decision makers than Ward surely must have known far earlier.

One premier currency heavyweight, John Taylor of FX Concepts, smelled blood (or had knowledge) back in July of last year of the eventual amputation of Greece from the euro.  His seemingly radical call for gold to reach $1,900 during that unusual summer rally of 2011 in the precious metals, coupled with his brazen prediction of gold $1,000 in April-May of 2012 as well as the euro trading below parity against the dollar, turned many heads.

“I would be surprised to see the euro hold above $1 through this crisis,” Taylor reiterated his summer call to Bloomberg Television’s Michael McKee on Oct. 11  “It’s not over. The banks are going to be in trouble when Europe goes into a recession next year.”

Moreover, Taylor has once again reminded investors of his sentiments regarding the Eurozone and the implications of an imminent Lehman 2.0—but this time, a Lehman-like meltdown of industrial strength.

Thursday, posted Taylor’s latest missive, which reads, in part:

The market has not opened its eyes to the impact this Greek unraveling will have. The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books.

Supposedly, evidences by market action to every news flash of a Greek ‘deal’ has calmed markets, putting the risk-on trade into full swing.  But, according to Taylor—who makes no mention of the specifics to the politics—a disaster is in the offing, not a smooth juiced up trade in equities, bond spreads and gold as a result of a job-well-done in ameliorating bank stresses.

In the meantime, evidence of ever-increasing violence in Greece has been the response.  The latest clash with police got noticeably worse this week.

“Before the vote took place there were 80,000 people on the streets, outside the Greek Parliament, basically attempting to storm the Parliament,” UK Independence Party Leader Nigel Farage told King World News.  “There were 5,000 Greek police there using tear gas and there were 10 major buildings that were set on fire.  It really was a very dramatic scene that took place in Athens on Sunday.

Further insistence by Brussels and Germany to subjugate Greeks appears more likely to threaten the lives of those hired to represent the nation of 11.5 million Greeks.  Letting the country exit the euro appears to be the most rational political move before a full-blown Arab Spring sparks in Europe.  Therefore, dropping Greece and ‘ring fencing’ European and American banks could be the most logical solution to Greece—but the plan for a trap must be sprung into action overnight to prevent a run on the banks of a more unpredictable nature.

Capital controls are easy to institute, but where to get the cash?

That solution can only come from the only central bank that can and has been largely getting away with money printing (also, for the most part, legally unencumbered) without much tears for more than 40 years—the Fed.

In late November, the Fed announced a rate deduction of 50 basis points to its currency swap lines with the BOJ, BOE, ECB, SNB and BOC, in a coordinated effort to grease the global banking system (or preparation for the big day on March 23).  The operation is headed by the NY Fed and its mostly unmentionable Exchange Stabilization Fund (ESF).

When asked in December by a House Oversight and Government Reform Subcommittee about the Fed’s move to open the money spigots to five of the world’s most influential central banks, NY Fed president William Dudley said, he “can’t imagine” the Fed ever undertaking unprecedented and politically charged action such as bailing out the Western world triggered by a European meltdown.

“The bar to doing that would be extraordinarily high,” Dudley, the successor to Timothy Geithner.  “We have never gone out and bought large portions of sovereign debt in the history of the Fed that I’m aware of.”

“This is about ensuring the flow of credit to U.S. households and businesses,” Dudley added. “It is in the U.S. national interest to make sure that non-U.S. banks that are judged to be sound by their central bank are able to access the U.S. dollar funding they need in order to be able to continue to finance their U.S. dollar assets.”

Of course, bailing out, or more euphemistically speaking—ring fencing, Europe is in the national interest of the U.S. because, if Europe melts down the U.S. melts down, and it truly will be financial Armageddon.  And that scenario will not be left in the hands of a bunch of bumbling European bureaucrats, who have for a millennium never gotten along when push comes to shove, and most likely never will.

Wasn’t it Gerald Celente of Trends Research Institute who predicted a financial meltdown and bank holidays by the end of the first quarter?  The world will soon find out. Sign-up for my 100% FREE Alerts