Nouriel Roubini: A market ‘time bomb’ is raising the risk of a dramatic collapse [View all]

[marmar]

Nouriel Roubini, one of the few prominent economists credited with predicting the 2008 financial crisis, thinks more trouble could be just around the corner.

Roubini’s latest piece over at Project Syndicate is a warning particularly about the low levels of market liquidity:

A paradox has emerged in the financial markets of the advanced economies since the 2008 global financial crisis. Unconventional monetary policies have created a massive overhang of liquidity. But a series of recent shocks suggests that macro liquidity has become linked with severe market illiquidity.

That’s a slightly wonkish way of saying not enough money is moving in markets at any one time. That means small changes in positions can have much bigger changes on asset prices — small corrections become big corrections, and big corrections can become crashes. .....................(more)

The complete piece is at: http://business.financialpost.com/business-insider/nouriel-roubini-a-market-time-bomb-is-raising-the-risk-of-a-dramatic-collapse