Dr. Doom is back. Last week, New York University economist Nouriel Roubini decided to speak out about the current economic recovery, warning that it cannot last. I'm not quite sure how this blog missed my radar screen, so I must thank Robert J. Samuelson for bringing it to my attention yesterday.

Roubini contends that while there was a massive rally in "all sorts of risky assets" has caused the dollar had weakened sharply and government bond yields have "increased but stayed low and stable." These risky assets that Roubini discusses are equities, oil, energy, and commodity. Dr. Doom believes that the prices for these risky assets have risen too far and too fast compared to macroeconomic fundamentals.

Don't count me among Henry Blodget's admirers, but he makes an interesting argument in a recent video posted on BusinessInsider.com (see below). Blodget argues that Federal Reserve Chairman Ben Bernanke has a "secret plan" to keep interest rates too low for too long on purpose. Why? To encourage inflation. According to Blodget, Bernanke has two good reasons for doing this:

• Faster economic growth, which leads to more jobs, fewer angry constituents, and a Congress that's happier with Ben Bernanke.
• Faster erosion of the real value of our debts. Consumers and the government are drowning under a massive debt load. One way to make paying off this debt easier is to make the dollars it is denominated in worth less. Bernanke will try to hasten this process as much as possible, taking it right to the point where our creditor China is mad as hell -- but not quite to the point where China actually stops lending to us.

Consumer borrowing fell for the eighth straight month in September. This record-setting streak is due largely to tightening by lenders, unemployment and the conservative preference to pay down debt rather than spend. This widespread fit of fiscal responsibility, economists fret, could prevent a recovery from taking root, since consumer spending is responsible for 70% of the U.S. economy. This conventional thinking, of course, overlooks the fact that an eventual increase in spending that isn't fueled by consumer spending will yield a recovery that's more likely to last.

According to the Federal Reserve, borrowing fell at an annual rate of $14.8 billion in September -- it's biggest drop since July and much larger than the $10 billion predicted by economists. The behavior is exactly what you'd find in people worried about losing their jobs or focused on rebuilding safety funds and investment portfolios. Those who want to borrow are finding banks won't be complicit this time, as they clamp down on lending practices.

Is a Fed rate tightening up ahead any time soon? Despite concern that low, real, short-term interest rates are hurting the dollar. Don't count on it.

First, the U.S. Federal Reserve wants to encourage banks to lend -- for auto purchases, and especially for business loans -- and nothing prompts banks to lend, even in tighter capital times, like low-interest-rate or zero-interest-rate money.

Wednesday, the Fed announced that interest rates would remain at zero to 0.25% for at least the next six months.

The Fed statement read as follows: "weak conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The only change in the Fed's policy was a tweak in the amount of corporate debt that the Fed intends to buy.

The Federal Reserve Open Market Committee (FOMC) issued its statement almost exactly as expected. The language on interest rates is remaining low for an extended period of time remained largely unchanged, and the decision was unanimous.

As I have mentioned earlier, the Fed continues to avoid any potential language which could disrupt the financial markets. Any potentially controversial ideas seem to be reserved for speeches by the Chairman and other government officials.

One modest ray of light on the fiscal front for the United States: the U.S. Treasury, as expected, announced that total borrowing for the current quarter (October quarter) will be 43% lower, as a result of a reduction in money needed to help the U.S. Federal Reserve manage its balance sheet.

The Treasury said net borrowing will total $276 billion for October through December, compared to the previous estimate of $486 billion. The Treasury also projects a borrowing of $478 billion for the January-March quarter.

Against the backdrop of heightened public criticism, The U.S. Federal Reserve is trying to encourage banks to take the first step in controlling excessive pay and bonuses. Regulators have established broad guidelines for pay incentives and bonuses. However, they are quite loose and do not nail down any specifics. Regulators are trying to coax compliance before the end of the year.

Britain has taken the lead and mandated that a percentage of bankers' bonuses should be deferred for a number of years.

Why is there such a public outcry to curb excessive bankers' pay and bonuses?

Wouldn't you like to be a fly on the wall when the Fed meets with bankers on pay review? You can bet that sparks will fly.

Monday is the day this happens. We already know that the bankers do not want the Fed meddling in their compensation policies. However, there is pressure from the public and Congress for a clamp down on excessive bank pay and bonuses, especially at the big banks.

Remember when the Federal Reserve and general public were blasting companies like AIG for going on retreats and holding conferences at luxury resorts? Well, on October 29, it was reported that the Fed has held its conferences at "exotic high-prices locales."

The Washington Post reported on October 28, that the San Francisco Fed hosted a conference at the "spectacular Bacara Resort and Spa" in Santa Barbara, where it paid $300 a night for the rooms -- an off-season price. Perhaps we should be praising the frugal nature of the Fed, as suites can run $2,000 during the peak season. Ben Bernanke attended this conference, which has drawn the ire of some. This conference was followed by a conference held by the Boston Fed at an Inn that charges up to $320 a night for regular rooms and nearly two grand a night for suites.

Economist and president of a research firm that bears his name, Andrew Smithers (not related to the Smithers of Mr. Burns fame) is saying our on-fire stock market is set to burn itself out. The S&P 500 Index is overvalued by 40%, he believes, and we can expect a plunge thanks to central bankers restraining themselves on the securities purchases that have pushed the markets up so far so fast. Also, banks are going to need to sell more shares to raise capital and pump up their balance sheets.

If the S&P 500 were to take a 40% dive today, it would fall to 647.76 (based on the Friday close), below the low it recorded in March.

What is the Beige Book and what does it contain? The US Federal Reserve keeps anecdotal reports on the economy in what is called the "Beige Book." Here are some notes on the key topics:

• There was some improvement in two of the hardest hit areas -- residential real estate and manufacturing.
• Gains in economic activity generally outnumbered declines.
• "Grim" was how the Fed described commercial real estate, "with conditions described as either weak or deteriorating across all districts." Regional banks said they did not see improvement in commercial real estate going forward into 2010.

Stocks are poised to head lower as investors continue to digest news out Tuesday about the nation's flagging housing market. While in recent months optimism had crept into builder stocks in anticipation of recovery, a report from the Commerce Department showed new-home construction flat last month.

The news sent the three major U.S. stock indexes lower in trading yesterday, and futures this morning show the Nasdaq Composite Index and the S&P 500 each lower by a half percent, along with the Dow Jones industrial average, which could be trading back under the 10,000 level.

The U.S. dollar continued to decline today, and has helped push gold prices up sharply in today's action.

The dollar has been very weak lately, and as more concern mounts of the dollar's strength more investors are rushing into the precious metal, which traded up as high as $1,069.70 today, and is currently up $1.70 an ounce to $1,059.20.

Why is the Federal Reserve doing "reverse repos?" What is a "reverse repo" and how does it work?

Looking back at the past year, the Federal Reserve has printed piles of money and pumped them into the banking system and the economy. Now there is a good deal of worry that all of this excess money sloshing around will create inflation, not to mention that our dollar will head downward on world markets, creating uncertainty among trading partners across the globe. China stepped in the currency markets yesterday and "bought" dollars to support the dollar.

The Federal Reserve, mindful of the turmoil that a weakening dollar has on world markets has tested the use of "reverse repos" to drain money from our banking system. In a reverse repo the Fed sells assets such as Treasury securities to dealers for cash with the agreement to buy them back at a slightly higher price at a later date. The effect is that bank reserves are drained from the financial system.