Wednesday, 16 September 2009

Be Cautious about Analyzing Situation

Nouriel Roubini, Professor of New York University, Tuesday [25/8] informed Business News on the probability of another round of crisis hampering in the next few months if America did not take aggressive steps to break in-transparency of the operators of the financial sector, remarked : “The discourse on the world’s new economic system is emphasized on openness. But the fact is that most of the problem handling concepts are still grey, not resolute. The most fearful things is that so many lendings or credit which are not focused on credit for consumption, housing, or property but also credit for investment portfolio which involve risk, like among others, shares”.

According to Nouriel Rubini, who was better known as “Dr Doom” [of Doomsday] there were to many companies of the financial sector who shoulder heavy loan obligations to be invested in various investments portfolio “With such a low level of interest rate and definitely unattractive to investors there are many other security companies or financial institutions who drive global investors, private or corporations, to invest in risky investment portfolio. As you are aware, financial products are so numerous, so complex and so extraordinary in the value of funds that spin within. With the tendency of America being less transparent, that risk is still there that in time to come, the bubble will burst once more”.

With the risk of bubble burst, Dr Boom stated that the global economic structure would take the form of W-shape “We have not even made it to return to the initial point where the global perception was at normal point, we plunge again and this would form the W-shape. With such probability, it is better to prepare for the worst scenario”.

In respond to the said graphic figures Noriel commented : “Just see how massive the lending extended to investment portfolio in the form of share papers. Worthless papers are for sale when the corporates represented by those papers go bankrupt. Who could guarantee that a company would survive a turbulence? For example, who dare to bet that a company as big as General Motors would not go bankrupt? The truth?”.

Dr Doom was regarded as representing false-tune voice in the discourse of global economy. Jean Claude Trichet, ECB President did not fully agree with Dr Doom’s perceptions. “The opinion of Noriel Roubini is not completely wrong. But after the world experienced such a terrific turbulence, it is unwise if we do not learn from the essence of problem and find the solution. Now even the banks of Switzerland which normally so tightly protect customers’ privacy, now are more open, more transparent and are willing to share customers’ data with other institutions. With such facts, the world has shown significant changes, at least in the financial sector”.

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