Roubini: A Big Crash Is Coming, But I Don’t Believe in Gold
11:19 UTC 23 Oct 2009 
5 Comments
From The Business Insider, Oct, 23, 2009:
Nouriel Roubini believes that a “wall of liquidity” is chasing all kinds of assets, yet once the economy disappoints expectations, it will all come crashing down.
Yet for Dr. Doom, gold isn’t the answer.
According to him, despite the temporarily asset bubbles right now, we’re still in a deflationary world and we’ll realize it soon enough once growth stagnates and all kinds of inflated asset categories come falling down.
Roubini:
I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.
The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.
This seems like the same drum that Roubini has been beating. He has a strong case that deflation could be in our future. Although right now I feel like we are in a limbo land where the direction has been found. Could be a rocky ride either way and be sure that your ready to play the market either way.
I’m personally betting on another round of deflation, but I expect it to be one where all dollar denominated assets sell off (to pay off debt in order to stave off bankruptcy).
That will likely be the last opportunity to buy precious metals at suppressed prices for some time (absent another round of deflation).
I tend to agree with you Dave on another round of deflation.
All this “liquidity” is just being swallowed up by the banks and not spreading anywhere to make things turn around… The demand is not going to be there from the consumer.
But as everyone always says the market is forward looking…. We’ll just use 6 months for the example… so the market bottomed out in early March and 6 months from then was this past September…. so things should be really ramping up around us!! ha… what a joke
If anything it seems to be ramping up to be *worse* than the first big decline. Although the margin that those stocks were bought on is gone (probably forever), so I don’t think we’ll see the same severity of selling near term.
New lows will come, just sometime next Spring IMO.
Hasn’t this guy had his 15 minutes? He’s no savant, just an economics professor who suffers delusional episodes of grandeur from reading too much of his wn press. I’d rather go with Jim rogers, he makes money.
Well so far Roubini has been definitely been wrong about the gold play as of late. Been really enjoying the action that we have been getting in our plays there, but who knows maybe the bottom will fall out of gold again like last year if deflation pops into the picture.