Nouriel Roubini: A Radical Policy Response to the Rising Risks of a Depression and Financial Crisis

[Better Believe It]

A Radical Policy Response to the Rising Risks of a Depression and Financial Crisis
By Nouriel Roubini
September 13, 2011

•Data suggest that developed and emerging markets alike are heading for a massive slowdown in growth, with advanced economies already slumping to stall speed.

•The risks ahead are not merely of a mild double dip, but rather are of another severe recession that could turn into an economic depression and a severe financial crisis in most advanced economies.

•What can be done to minimize the economic and financial fallout and reduce the tail risks of a severe economic and markets downturn? Any plan would include a combination of some or all of the following broad policy responses: Avert front-loaded fiscal austerity and provide short-term stimulus; ease monetary policy; provide liquidity to illiquid but solvent sovereigns and private agents; restructure unsustainable private and public debts in an orderly manner; recapitalize banks; restore the competitiveness of struggling economies, possibly through exits from monetary union; invest in workers and long-term productivity growth; encourage emerging markets to pull their weight and help global rebalancing.

The latest macro data indicate that most advanced economies—the U.S., most of the eurozone (EZ), the UK, Japan —are falling back into recession, while stress in the financial system and markets is reaching levels not seen since the collapse of Lehman Brothers. At the same time, hopes that strongly growing emerging markets (EMs) can decouple from the G7 downturns are now being dashed: The latest global PMIs suggest a massive slowdown of growth in EMs from China, Taiwan and South Korea in Asia to Brazil in Latin America and Turkey and Russia in emerging Europe. It is clear that we are at stall speed in the global economy and, as with an airplane that decelerates rapidly and stalls, there are only two options: Either the plane—the global economy—rapidly reaccelerates to return to escape velocity or it starts to free fall.

Read the full article at:

http://www.roubini.com/analysis/162686.php

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[elleng]

1. Thanks; been waiting to see something from Roubini.

[Better Believe It]

2. Be sure to register for the free trial subscription so you can read this and other articles.

[nadinbrzezinski]

3. Thanks, I will pass on the registration, but thanks

amazing... Krugman said the other night, we need to redefine depression.

[xchrom]

4. Recommend

[QC]

5. kick

[Better Believe It]

6. Kick

[kittykitty]

7. Kick!

[Selatius]

8. I'd like to break up some of these banks.

Hell, half of the items Roubini mentions aren't politically feasible, but neither is my suggestion.

Republicans are just going to block it in the House, and there's a fair chance right-wing Democrats in the Senate won't play ball. The Republicans are all about austerity measures right now, and they're seemingly wanting to balk at even short-term stimulus packages citing high deficits already.