Nouriel Roubini and Jeremy Grantham warn of stock market bubble crash
Matthew Lloyd/Getty Images and Reuters/Fred Prouser
- Jeremy Grantham and Nouriel Roubini are known for their bearish views on the markets and the economy.
- In a new PBS documentary about the Fed’s decade of cheap money, Grantham and Roubini sound the alarm for stocks.
- These are the top quotes from Grantham and Roubini age of easy money,
GMO’s Jeremy Grantham and economist Nouriel Roubini are known for their ultra-bearish views on the stock market and economy.
a new PBS Frontline documentary, age of easy moneyChronicles the Federal Reserve’s monetary policy decisions over the past decade and explores the potential financial consequences going forward.
Beginning in 2009, the Fed began a decade-long policy of providing cheap money to the economy by purchasing trillions of dollars of debt securities and keeping interest rates near zero. But last year, the Fed reversed its monetary policy by aggressively raising interest rates and reducing the size of its large bond portfolio.
Grantham and Roubini both offered their thoughts on what the Fed did to the markets in the documentary and what might happen next.
Here are his top quotes:
1. Roubini on $1,400 fiscal stimulus paycheck in 2021
“People like me, like Larry Summers and others, saw that enormous excitement—it was phenomenal, an order of magnitude greater than what we had  The global financial crisis – will lead to excessive demand, overheating and inflation,” Roubini said.
“We had bailout checks sent out to everybody – every household, every firm, every financial institution. It was too many and should have been more selective.”
2. Roubini is fueling bubbles on central banks
“We have had a couple of decades of really growing bubbles that have been fed and supported by central banks. And not only do we have bubbles, but we have bubbles that have been fueled by excessive leverage, excessive private and public borrowing. And taking extreme risks,” Roubini said.
3. Roubini on bursting the central bank bubble
“The party’s over. Inflation is high and rising. Central banks have to raise rates. It’s bursting the asset bubble. It’s increasing the amount of debt serviced by all of them like crazy.” Borrow more. So we lived in a bubble, a dream, and that dream in a bubble is bursting and turning into an economic and financial nightmare,” Roubini said.
4. Grantham on Federal Reserve bailing out investors
“Over the years, we have been trained to believe that the Fed is on our side. The Fed has trained us to believe that if we bet the market and we win, we are on our own. We get to keep the advantage. If we lose, they will exert every effort and every dollar possible, one way or another, to bail us out. It’s the most glorious kind of asymmetry,” Grantham said.
5. Treatise on the speculation and euphoria that marked the top of the bubble
“It’s the explosion of enthusiasm that usually ends these things … the housing market, the stock market and the bond market, all at the same time overpriced. If the Fed knew what it was doing it would This magnitude will not allow the bubble to happen,” Grantham said.
6. Treatise on the financialization of the economy
“In my career in the US, the percentage of GDP that goes to finance has gone from 3.5% to 8.5%. In a way, we are like a giant bloodsucker, and we have more than doubled in size and doubled in size. Sucking more than that. Bleeding out the rest of the economy. And we don’t generate any widgets. We don’t generate any real increase in income. We’re just a cost,” Grantham said.
Interviewer James Jacoby: “When you say ‘we’, you mean you and other members of the financial community have been this kind of bloodsucker on the economy? Is that what you’re saying?”
“Yes. Collectively we fulfill an absolutely necessary service, but what we’ve done is build on layers of more and more complex, costlier financial instruments. And that’s what creates all the profit for the financial industry.” It took a lot of ingenuity and a lot of salesmanship to do this, and a lot of lobbying in Congress, and we’ve imposed on the rest of the economy the idea that banking and finance are absolutely vital at all times. If you have anything to do with us Get it wrong, the whole economy will collapse into great disarray,” Grantham replied.
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