"The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign,” Roubini wrote on his Web site today. “At some point a sovereign bank may crack, in which case the ability of the governments to credibly commit to act as a backstop for the financial system -- including deposit guarantees -- could come unglued."
The one man systemic wrecking crew also sees a 30% chance of an L-shaped near depression without appropriate and aggressive policy action by the U.S. and major foreign economies.
"The global economy is now literally in free fall as the contraction of consumption, capital spending, residential investment, production employment, exports and imports is accelerating rather than decelerating,” Roubini said.
The protracted downturn Roubini warned of can only be prevented by “a strong, aggressive, coherent and credible combination of monetary easing (traditional and unorthodox),fiscal stimulus, proper clean-up of the financial system and reduction of the debt burden of insolvent private agents(households and non-financial companies),” he said.
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