Roubini: EUR/USD Should Dive Below Parity To Solve Debt

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Nouriel Roubini, also known as Dr. Doom, provided his latest gloomy picture of the global economy with a focus on the European debt crisis.

But Roubini also provided some solutions for the old continent: slashing interest rates, fiscal unity and a euro worth less than one dollar.

Speaking in a conference in London, the NYU professor famous for foreseeing the financial crisis also said that Greece isn’t the epicenter anymore, but that the crisis has already spread to Spain, Italy and even Germany. Germany’s economy grew by only 0.1% in Q2 The economy in France stalled.

What’s wrong with current policy? According to Roubini:

“Everybody is doing the same thing [cutting government spending]and by doing it at the same time, they are making [the crisis]worse.”

He warned about the impact of austerity in Britain and sees a stall in the US economy in Q4.

Solution for Europe according to the Dr.: The key to moving forward is growth. For that to happen in Europe, the ECB should cut interest rates (that’s obvious), more fiscal unity is needed (will take some time) and “the euro needs to trade below parity against the dollar”.

The euro is moving lower, but parity is far from sight. Only a very disorderly default of Greece can send the euro that low. There are higher chances of an orderly, yet not so elegant default coming this quarter. See the Q4 outlook below for all the scenarios.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

5 Comments

  1. The root causes of the current European and global crisis are systemic in nature, and no government has even begun to address them. The fact is that the current capitalist model stemming from the 1980s has reached its utmost limit and has no further potential. The only solution is to change it drastically and get a fresh start, but it seems no government has an inkling of how to go about it. They simply keep on trying to mend the present system with the same old measures, which do not and can not work, because the system itself has exhausted itself.

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  4. Let countries go bust, as well as banks! Stop using our money to save these incompetent people!
    Now the y will use as much as 2 trillion Euros: this is insane, they will PRINT this money and the situation will get even worse
    All this politicians are really useless incompetents

    • Parisian Thinker on

      Sergey’s right. The Central Bankers and their politicians are working within a failed system. Using the same old premises just because the rich pay them to do so won’t solve any problems.

      The question now is “what is money” and how is it to be measured when it is being printed to bail out failed capitalists?

      The system has failed leaving only more debt.
      We no longer have capitalism or democracy.