While most experts around the globe are worried about the eurozone crisis and the possibility of Greece defaulting on its debt or leaving the eurozone (which will inevitably make the Euro collapse), Nouriel Roubini, a Nobel Prize Winner, assumes that it is the US economy (not the European one) that presents the biggest danger for the global economy.
Nouriel Roubini: Global Economy Will Face Financial Storm in 2013
Nouriel Roubini, who predicted the 2008 global economic crisis, this time expresses concerns over US economic prospects. He says the US economy is in much worse condition than the eurozone economy.
In his article published in The Guardian, Mr. Roubini writes that the US economy is close to a collapse. In the coming years, the pace of the GDP growth will at best depend on the established long-term trend. In the first half of 2012, the GDP growth seems to be around 1.5% while in 2013 it is expected to slow down to 1% or even lower.
The famous economist expects 2013 to be much worse for the global economy than 2008.
According to Mr. Roubini, there are 5 factors that can undermine the global economy:
· The escalation of the eurozone crisis.
· The austerity program in the USA, including spending cuts and tax hikes. According to him, this may cause the world’s major economies to fall into recession.
· The “hard landing” of the Chinese economy.
· A further slowdown in emerging economies.
· The confrontation with Iran.
He also expects a major retracement in them market of US bonds. The Federal Reserve won’t be able to stop the process.
Earlier this month, Mr. Roubini expressed his opinion that in 2013 the governments of the world’s strongest economies will have fewer possibilities to maneuver and resolve the crisis than in 2008. He says the anti-crisis measures are working almost to the full, which reduces the possibility of stopping another economic aftershock.
According to Eugene Olkhovsky, ’s leading expert in financial markets from Canada, all those analysts who think that the US economy will recover due to lower oil prices, higher car sales, housing market boom and industrial production growth are wrong. This is nothing but an illusion.
The real factor that will drive US stocks and indexes will be uncertainty in multiple aspects:
· Who will become the US President?
· Will he preserve the current tax rates and public spending?
· Will new economic policies hinder a new plan of budget consolidation in mid-term perspective?
· What will be the reaction of international rating agencies?
According to the expert, another round of quantitative easing (if any) won’t result in the US Dollar weakening against the British Pound, the Euro and other major currencies. Therefore, it won’t stimulate the US export and won’t make other countries choose the same policy. At the same time, investors’ sentiment is another factor that can push the US economy closer to recession.
As for the US Dollar index, reports that it is currently forming a downtrend started at 83.69. The closest levels of support are 82,67 and 82,44. Technically, in order to reverse the downtrend, the price will have to overcome the top of the MF sloping channel and consolidate above the MF pivot 83,46 (as shown below):
The US economy is still number one. Therefore, if it “has caught a cold”, then the rest of the world with a weakened immune system may well fall ill as well, especially amid the continued eurozone crisis and the economic slowdown in China.
