Is Greece just a test drive?Roubini Says U.S. May Face Bond ‘Vigilantes’ Within Three YearsBy Jennifer Ryan
May 18 (
Bloomberg) -- The U.S. may fall victim to bond “vigilantes” targeting indebted nations from the U.K. to Japan in a potential second stage of the financial crisis, New York University professor Nouriel Roubini said.
“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the U.K., in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics today. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.’”
The euro touched a four-year low against the dollar today on concern nations with the largest budget deficits will struggle to meet the European Union’s austerity requirements. Roubini, speaking in a lecture hall packed with students who then queued to meet him at a book-signing, suggested that the public debt burden incurred after the banking panic of 2008 may now cause the financial crisis to metamorphose.
“There is now a massive re-leveraging of the public sector, with budget deficits on the order of 10 percent” of gross domestic product “in a number of countries,” Roubini said. “History would suggest that maybe this crisis is not really over. We just finished the first stage and there’s a risk of ending up in the second stage of this financial crisis.”
The U.S. posted its largest April budget deficit on record as the excess of spending over revenue rose to $82.7 billion. The federal debt is currently projected to reach 90 percent of the economy by 2020. ..........(more)
The complete piece is at:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXv.FAdyLJDs&pos=7