[wisconsin_cur]

The Twelve Steps

$this->bbcode_second_pass_quote('', 'P')rof Roubini is even fonder of lists than I am. Here are his 12 - yes, 12 - steps to financial disaster.

Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.

Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had "reckless or toxic features", argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks' ability to offer credit.

Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The "credit crunch" would then spread from mortgages to a wide range of consumer credit.

Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.

Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.

[NeoPeasant]

What happens when you add to Prof Roubini's scenario the loss of the abundant cheap energy and the abundant cheap resources derived from it that our economy needs to live and grow?

[Fishman]

I think the term is:
TSHTF
Alternatively:
TEOTWAWKI

I'm presently reading a book by Larry Burkett written in the early 90's about runnaway government spending and the consequences.

[MrBill]

I think you have to Roubini with a grain of salt. He has predicted 12 out of the last 6 recessions! ; - )

[aflurry]

$this->bbcode_second_pass_quote('MrBill', 'I') think you have to Roubini with a grain of salt. He has predicted 12 out of the last 6 recessions! ; - )

[NeoPeasant]

$this->bbcode_second_pass_quote('MrBill', 'I') think you have to Roubini with a grain of salt. He has predicted 12 out of the last 6 recessions! ; - )

[sittinguy]

BRING,,,ON,,,,THE ,,,DOOM

[Concerned]

$this->bbcode_second_pass_quote('NeoPeasant', '')$this->bbcode_second_pass_quote('MrBill', 'I') think you have to Roubini with a grain of salt. He has predicted 12 out of the last 6 recessions! ; - )

[MrBill]

There is a clear difference between winning a war and enforcing the peace. Especially in countries that are busy fighting their own internal civil wars. Besides it is probably not good policy to start a war unless you're prepared to win it with or without collateral damage.