“..Roubini Says Carry Trades Fueling ‘Huge’ Asset Bubble ..”

“.. Investors worldwide are borrowing dollars to buy assets including equities and commodities ..

.. fueling “huge” bubbles that may spark another financial crisis, said New York University professor Nouriel Roubini.

“We have the mother of all carry trades,” Roubini, who predicted the banking crisis that spurred more than $1.6 trillion of asset writedowns and credit losses at financial companies worldwide since 2007 .. said via satellite to a conference in Cape Town, South Africa.

“Everybody’s playing the same game .. and this game is becoming dangerous.”

The dollar has dropped 12 percent in the past year against a basket of six major currencies as the Federal Reserve, led by Chairman Ben S. Bernanke, cut interest rates to near zero in an effort to lift the U.S. economy out of its worst recession since the 1930s.

Roubini said the dollar will eventually “bottom out” .. as the Fed raises borrowing costs ..

.. and withdraws stimulus measures including purchases of government debt.

That may force investors to reverse carry trades .. and “rush to the exit,” he said.

“The risk is that we are planting the seeds of the next financial crisis,” said Roubini, chairman of New York-based research and advisory service Roubini Global Economics.

“This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.”

go to source/story>>Roubini Says Carry Trades Fueling ‘Huge’ Asset Bubble (Update3) – Bloomberg.com