The Mother Of All Meltdowns

America’s economy risks the mother of all meltdowns

“I would tell audiences that we were facing not a bubble but a froth – lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy.” Alan Greenspan, The Age of Turbulence.

That used to be Mr Greenspan’s view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University’s Stern School of Business, founder of RGE monitor.

Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome”**. The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”

Emphasis added by me.

There are some detailed lists there that gives plausible reasons why he believes that.

I noticed, however, that massive increases in the price oil of aren’t figured in at all!

For more information on that vicious circle, see this previous post and this one.

Let’s use the GoingForward Machine to see what Winter 2009 will look like for some subprime loan victims:

americanwinter2009.jpg

Explore posts in the same categories: C.O.A.T. - Money, C.O.A.T. - Other

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