24
Nov
Stand By For “Generalised Systemic Financial Meltdown”
“Gold is for optimists. I’m diversifying into canned goods.”
So said one reader on Felix Salmon’s Market Movers blog, in response to a post on crisis blogging.
The trouble with being the leading harbinger of doom is that, rather like crack, you’re going to need to keep pushing the limits to keep achieving the same highs. So Salmon notes that the über-bears, no longer satisfied with dire predictions of a US recession, have now moved onto heralding a full-blown financial crisis. Only an all-out, systemic meltdown will do.
The bear in question, Nouriel Roubini, has long been positioned firmly on the gloomy side of the outlook scale - but the past week’s batch of predictions has been ominous even by his own dark standards. In fact, they’re nigh on apolcalyptic.
After all, back in March, Roubini was clear - the US landing would be hard, or at best, a growth recession.
Enjoy that sentiment. That’s the good old days.
In July Roubini wrote that the “financial fallout of the worst housing recession in decades is only just beginning.” In August, he noted that in his opinion the market turmoil was “much worst” than the liquidity crisis following LTCM. By September, he had a confession to make: he’d been far too optimistic on housing. And last month, he approvingly relayed a comment from a “senior professional in one of the largest financial institutions in the world”, in whose opinion a “miracle is needed to avoid recession.”
The trouble is that Roubini has a habit of being right - uncannily so in his predictions on US housing.
And so to the latest batch of fun. On housing, the message is largely unchanged - this housing recession will be “worse than any in US history” and the “financial bloodbath” has only just started.
But here’s the catch. Roubini argues that the inevitability, or at least high likelihood, of a US recession is now becoming more widely accepted. He notes the Economist cover story, and that leading Wall Street analysts previously in the soft landing camp have shifted their stance. The debate, says Roubini, has now shifted from ‘if recession’, to ‘how deep, protracted and severe’ such a recession will be.
So for all the bears out there, crack pipes to the ready, here is your latest hit:
