Tags: Roubini Bond Vigilantes May Hit U.S. | Japan

Roubini: Bond Vigilantes May Hit U.S., Japan

Wednesday, 05 May 2010 02:01 PM

The sovereign debt crisis will spread to economies outside Greece, with the United States and Japan perhaps representing the ultimate targets, says New York University economist Nouriel Roubini.

"The recent problems faced by Greece are only the tip of a sovereign debt iceberg in many advanced economies,” Roubini wrote in a report to subscribers at RGE Monitor Web site.

“Bond market vigilantes already have taken aim at Greece, Spain, Portugal, the United Kingdom, Ireland, and Iceland, pushing government bond yields higher,” he pointed out.

“Eventually they may take aim at other countries — even Japan and the United States — where fiscal policy is on an unsustainable path." he wrote.

The U.S. budget deficit totaled $1.42 trillion last year, and the Congressional Budget Office projects that government debt will total 60 percent of GDP this year.

Roubini worries that players in the financial system haven’t learned from the massive credit crisis.

"There is a lot of talk about better regulation and supervision of the financial system, but the financial industry is back to business as usual,” Roubini said.

“(That includes) rebuilding leverage, engaging in proprietary trading and other risky behavior, compensating bankers with indecent bonuses and lobbying against better regulation.”

Roubini isn’t the only expert expecting more trouble.

“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” former IMF chief economist Ken Rogoff told Bloomberg.

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The sovereign debt crisis will spread to economies outside Greece, with the United States and Japan perhaps representing the ultimate targets, says New York University economist Nouriel Roubini. The recent problems faced by Greece are only the tip of a sovereign debt...
Roubini Bond Vigilantes May Hit U.S.,Japan
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2010-01-05
 

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