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Subject:	FWC: Return to the Abyss by Nouriel Roubini
Date:	Sat, 15 May 2010 17:46:57 -0700
From:	Jas Jain

"Crises are the inevitable result of a build-up of macroeconomic, financial, and policy risks and vulnerabilities: assets bubbles, excessive risk-taking and leverage, credit booms, loose money, lack of proper supervision and regulation of the financial system, greed, and risky investments by banks and other financial institutions.

"History also suggests that financial crises tend to morph over time. Crises like those we have recently endured were initially driven by excessive debt and leverage among private-sector agents – households, banks and financial institutions, corporate firms. This eventually led to a re-leveraging of the public sector as fiscal stimulus and socialization of private losses – bail-out programs – caused a dangerous rise in budget deficits and the stock of public debt."

What this Turkish turkey fails to mention is that there is fraud underlying the current crisis in the EMU and the Crisis of 2007-08 in the US. The EMU was based on certain criteria on budget deficits and the governmental debt as % of the GDP. First, they were relaxed and then they have been essentially abandoned. Now, the countries that failed to meet the criteria are being bailed out. Thus far, the bailouts in the Euro Zone and the US, for the most part, have been directly and indirectly bank bailouts. The governments not sticking to agreements before the crises and enforcing contracts is fraud. Fraud also lies in scaring people that without bailouts things would be lot worse. There is next-to-nil probability that the US and the Euro Zone can avoid the Greater Depression. Of course, that would take the global economies into depressions of varying intensity and duration.

It is the fraud, stupid! Democratic governments committing fraud is normal. People expect it and get it!! End of the democracies is unavoidable. Nothing is going to prevent China from getting to the top. America and the "American values" are going to be lot less popular twenty years from now. There is lot more corruption and fraud among businesses in America and India than in China. Chinese government has prosecuted lot more wealthy crooks than any other country to the best of my knowledge.

Jas

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Return to the Abyss by Nouriel Roubini:

http://www.project-syndicate.org/commentary/roubini25/English

NEW YORK – One interpretation of financial crises is that they are, in Nassim Taleb's phrase, "black swan" events – unplanned and unpredictable occurrences that change the course of history. But, in my new book on financial crises, Crisis Economics – which covers not only the recent crisis, but also dozens of others throughout history and across both advanced economies and emerging markets – I show that financial crises are, instead, predictable "white swan" events. What is happening now – the second stage of the global financial crisis – was no less predictable.

Crises are the inevitable result of a build-up of macroeconomic, financial, and policy risks and vulnerabilities: assets bubbles, excessive risk-taking and leverage, credit booms, loose money, lack of proper supervision and regulation of the financial system, greed, and risky investments by banks and other financial institutions.

History also suggests that financial crises tend to morph over time. Crises like those we have recently endured were initially driven by excessive debt and leverage among private-sector agents – households, banks and financial institutions, corporate firms. This eventually led to a re-leveraging of the public sector as fiscal stimulus and socialization of private losses – bail-out programs – caused a dangerous rise in budget deficits and the stock of public debt.

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