Roubini: The Mother of All Carry Trades Faces an Inevitable Bust

In an interview with CNBC this morning, Nouriel Roubini said the mother of all carry trades is becoming larger and faces an inevitable bust. According to  Roubini, an economist at New York University and chairman of RGE Monitor, there’s going to eventually be an end to this carry trade. “When that snapback of the dollar is going to occur,” he said, “it’s not going to be 2% or 3%, it’s going to be more like 25 or 20%. And then everybody will have to close their shorts on the dollar, they’ll have to sell these risky assets across the world and you could have this huge asset bubble going into an asset bust.”

Roubini alluded also during the interview to the fact that with the Fed expected to keep rates at zero levels for some time to come, and as the reappearance of billions of dollars in investment capital in equity and commodities markets accelerates while  inflating asset prices , the bubble will become bigger globally. “The bigger the bubble the bigger is going to be the crash…It’s going to eventually occur but it’s going to be six months from now, a year from now,” Roubini said.