A Halloween Story: "Severe Global Depression" By: Mark W Adams

Nouriel Roubini shrieks into the night:

The world is at severe risk of a global systemic financial meltdown and a severe global depression

The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity were excessive leveraging and bubbles were not limited to housing in the US but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.

At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the US and advanced economies contraction would be short and shallow – a V-shaped six month recession – has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the US and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown the probability that the outcome could become a decade long L-shaped recession – like the one experienced by Japan after the bursting of its real estate and equity bubble – cannot be ruled out.

Roubini calls for coordinated global action on radical solutions and a change in leadership of economic policy. The urgency of the situation is something he hardly candy coats and the G7 and IMF/World Bank annual meetings this weekend couldn't come at a more opportune time:

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally...

If you're into the nuts and bolts of his suggestions you can and should read the whole thing. It's massive, it's a complete take over of the entire financial system world wide, and I doubt it can be realistically done or is politically feasible. Nor do I believe he's covered everything that needs to be done off the top of his considerably impressive head.

His update is ominous.

Thursday midnite update: A few hours after I had written this note the market crash that I warned about is underway in Asia: the Nikkei index in Japan is down 11% and all other Asian markets are sharply down. This reinforces the urgency of credible and rapid policy actions by the G7 financial officials who are meeting in a few hours in Washington and the need to also involve in such global policy coordination the systemically important emergent market economies.

I'd just like to say to every wingnut who has argued with me over fiscal policy the last several years as you cheered the dismantling of the New Deal -- Go to Hell.

Update, via Atrios ... Great Britain just foreclosed on Iceland. No, really.