Crigger: But does gold still have a role to play in currency, either as a de facto or literal currency standard?

Roubini: Well, the central banks are diversifying their foreign reserves, and that's increasing their demand for gold. China's doing it; India's doing it; others are doing it. Gold is going higher in part because of this central bank diversification, and in part because, of course, whenever the dollar weakens, we see an inverse relation within the dollar price of commodities, including gold.

But if you ask me, can gold can go towards $1,300, $1,400, $1,500 or $2,000, like many gold bugs say? Well, there's only two scenarios in which that could happen. First would be a real increase in global inflation, and we don't see that right now. In most emerging markets and advanced economies there is actual deflation, because there's glut of supply rather than demand, workers have no pricing power and they cut wages. So in a situation where there's deflation rather than inflation, why would gold be staying high? It cannot be. It can go up above or below $1,000, but it's going to move around those levels, and it's not going to break toward $1,500.

The other scenario is Armageddon, another depression, where everybody would buy canned food, guns, ammunition and gold bars and run to a cabin in the mountains. That was the risk after Lehman, but that risk has been severely reduced.

So we don't have Armageddon; we don't have inflation, so gold can maybe go slightly higher. But those people who delude themselves that gold can go to $1,500 or $2,000 are just talking nonsense. The fundamentals are not justified, and those people are just talking their books.

Crigger: Is OPEC still effective at managing oil prices? In the 1970s, they were viewed as this mastermind of pricing; but these days, they seem pretty ineffectual.

Roubini: OPEC can manage prices marginally. The only supplier that has excess capacity that can use it to stabilize oil prices is Saudi Arabia. But once oil is above $80 like it is now, ETF demand, options demand, speculative demand, these can easily push it to above $100.

I would say that if there were a reason we had the global recession last year, it wasn't just Lehman or the subprime mortgage problem; it was that when oil went to $145. That was a major, real trade shock negative, and a real disposable-income shock for the U.S., Europe, Japan, China and all the other oil-importing and commodity-importing nations around the world. That kept the world in recession when oil was at $145. Now, I feel that oil at $100 is going to tip the world into a double-dip recession.

Crigger: Why?

Roubini: Because last year, when oil went to $145, half the world, like emerging markets, was growing very fast. But today, with the global economic collapse, we're now barely out of the ground. The economy is on its knees, trying to rise. If oil were to go because of nonfundamental reasons toward $100, then I would say oil at $100 would be like a big hammer beating on the head of the global economy. At current levels, oil prices aren't justified, but they can go higher because of market dynamics and speculation; much higher.

Crigger: You've come out in favor of position limits for commodities—how would that solve this problem?

Roubini: I'm in favor of position limits, because I think this volatility in oil prices is severely damaging the global economy. When oil goes to $145, we have a global recession. When oil goes to $30, nobody invests in new capacity. And these swings in boom and bust in oil prices are extremely damaging to economic growth. It's time to control it. If we don't control it, these booms and busts are going to become more severe, more damaging and more risky.

Crigger: If we put in place position limits, how would that impact futures-based commodities funds? Would that kill them off, as some have said?

Roubini: It might kill them off, but frankly, who cares? I care about the real economy. I care about not having another global recession. If people are speculating on oil, and that pushes oil up to $145 like last year—I'm in favor of limits on that. Who cares about this? Frankly, I couldn't care less.

Crigger: Thanks for your time. Enjoy the conference!

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