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All you people buying Gold at $1000 per oz are so screwed

November 10, 2009

at least according to Nouriel Roubini.

Roubini is, of course, the once-obscure New York University economist whose dire warnings about a financial crisis proved depressingly prophetic. Last week, Roubini was shouting. Writing in the Financial Times, he warned that the Federal Reserve and other government central banks are fueling a massive new asset “bubble” that — while not in imminent danger of bursting — will someday do so with calamitous consequences.


Here is Roubini’s argument: The Fed is holding short-term interest rates near zero. Investors and speculators borrow dollars cheaply and use them to buy various assets — stocks, bonds, gold, oil, minerals, foreign currencies. Prices rise. Huge profits can be made.

But this can’t last, Roubini warns. The Fed will eventually raise interest rates. Or outside events (a confrontation with Iran, fear of a double-dip recession) will change market psychology. Then investors will rush to lock in profits, and the sell-off will trigger a crash. Stock, bond and commodity prices will plunge. Losses will mount, confidence will fall and the real economy will suffer.

You just cant win anymore. One way or another you are going broke.

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