Nouriel Roubini: "cannot rule out a systemic collapse and a global depression"

By on October 10, 2008

Nouriel Roubini, in his latest missive at his Global EconoMonitor, sounded particularly dour about the future prospects for the world economy. Unfortunately, he is one of the few commentators with any credibility left. He does offer some solutions that the dimwits in Washington might want to heed:

– another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;

– a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;

– a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;

– massive and unlimited provision of liquidity to solvent financial institutions;

– public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;

– a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;

– a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;

– an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.


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