Monday, February 25, 2008

US could suffer massive recessio

The US could see a major recession, according to analyst Nouriel Roubini, of the Stern School of Business of New York University.

There is now a consensus that the US will see a slowdown and probably a recession in the near future, but Roubini predicted this as far back as mid-2006, when his position was in the clear minority.

Worryingly, Roubini now forecasts that the chances of a disastrous sequence of events with dire economic and financial consequences are rising.

Between four and six trillion dollars would be slashed from household wealth if prices crash by 20-30% as he predicts.

This would worsen the already substantial writedowns from the subprime mortgage crisis and trigger defaulting on unsecured personal debt, the downgrading of monoline insurers and possibly the bankruptcy of a major financial institution.

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