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Top Economists Agree 2009 Worst Financial Crisis Since Great Depression

From Business Wire:

Three Top Economists Agree 2009 Worst Financial Crisis Since Great Depression; Risks Increase if Right Steps are Not Taken

Three of the country’s most respected economists warned of a deepening economic crisis if the banking system is not quickly fixed in a wide-ranging conversation last night with Cambridge Energy Research Associates (CERA) Chairman Daniel Yergin and an audience of nearly 1,000 people who filled the Westin Galleria ballroom at CERAWeek 2009.

Nouriel Roubini, professor of economics and international business at New York University, Kenneth Rogoff, professor of economics and public policy at Harvard University, and Nariman Behravesh, chief economist and executive vice president for IHS Global Insight, all agreed that this is the worst financial crisis since the Great Depression.

Rogoff, formerly chief economist at the International Monetary Fund (IMF), described the current recession as “a once in a 50-year event.” He said that “2009 basically is a write-off” but added, “I’m ‘constructive’ about 2010 in that we’ll have tepid growth in the world economy. It’s unusual for a recession to last more than two years. However, it will be very slow coming out of it. The big growth will be in some of the emerging markets. It’s the developed countries where the biggest hurt is occurring.”

Rogoff argued that the $790 billion stimulus bill agreed to this week is only part of the answer. “It’s like giving a blood transfusion while the patient is still bleeding,” he said. “If we’re not going to fix the banking system at the same time, then it’s just a temporary boost in the economy. We have simply not taken the proper decisive action with the banks.”

Roubini, also chairman of RGE Monitor, said: “Even if we have positive growth next year, say one percent, it’s going to feel like a recession even if we’re out of it. If we don’t get the monetary part right, the fiscal policy right, if we don’t fix the banking system the right way, if we don’t deal with the debt burden of the household sector I see a one-third possibility of (an extended) L-shaped Japanese stagnation.”

Behravesh disagreed. “This is the Great Recession, not the Great Depression 2.0 and not Japan in the last decade,” he said. “We’re seeing a different policy response than what we saw during the Depression and Japan in the 1990s. It took Japan seven years to deal with its banking crisis. The U.S. has moved in a matter of months and it’s had some fiscal effect. Our fiscal stimulus may not be enough or the right kind, but it’s much different than the Depression or Japan.”

Behravesh forecasts a decline in gross domestic product for 2009 in the U.S. of 2.5 to 3.0 percent and a global decline in GDP of 1.0 to 1.5 percent.

Why did people not see the vulnerability of the U.S. economy to an economic bust? “Whenever you have an environment where there’s a giant influx of money into your country — and here it was coming out of emerging markets — it gives an illusion that things are better than they really are,” Rogoff explained. “You lose your judgment. At the heart of what happened is that we lost perspective on what was real and what was really fueled by these low interest rates, this influx of money.”

When asked by Yergin, Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil, Money and Power, about the role that oil might have played in the economic downturn, Roubini, said: “The financial crisis would have led to a severe downturn in oil prices anyway. I would not be surprised if oil prices fell below $30 later this year. There could be even further weakness in oil prices unless OPEC is able to cut production even further.”

Behravesh, author of the recently published book Spin-Free Economics: A No-Nonsense, Nonpartisan Guide to Today’s Global Economic Debates, pointed to China as having the ability to maintain some economic growth which could “help oil prices get to the $50-60 range sometime next year.” Rogoff added that oil prices could be “shooting back up when the downturn ends and economies grow. That’s what the historical record shows. The oil price will rise again as the developing world grows.”

All three agreed that the economic stimulus plan is needed, but it alone will not fix the nation’s economic problems. “If there is not an increase in government spending then the contraction will be more severe,” Roubini said. “However, tax cuts will not make a difference. Last year’s tax cuts were mostly saved. Infrastructure spending will take a long time as there are few projects ‘shovel ready’ so the overall impact of the stimulus may be smaller.

“People worry about the housing bust and the drop in consumption,” he added, “but the biggest story is the drop in capital spending. Corporations are concerned about whether they will survive so we’re seeing a global collapse of (capital) spending. That’s why something must be done on the stimulus side to diminish the contraction of economic activity.”

Behravesh added that the old relationship between a consumer-dependent U.S. and an export-dependent world would also need to change. “There is a pent-up demand on the part of businesses, consumers and households in terms of homes and consumer durables. Now everybody’s scared and they’re not spending. The question is ‘when does that pent-up demand get unleashed?’ That could come back very strongly. We tend to underestimate that. In boom times, there’s a tendency to think the business cycle’s dead. The same problem occurs in a bust – that we’ll never get out of this.

“There has to be a fundamental change in the debt-financed consumer spending in the U.S. and the addiction to exports of other countries,” he concluded.

From the Houston Chronicle:

Economists paint gloomy picture

In a freewheeling discussion about “The Great Recession” and energy, top economists painted dark scenarios that could be ranked as bad, worse and horrendous.

“2009 is basically a write-off,” Harvard University economics professor Kenneth Rogoff told a packed audience at CERAWeek, the annual Houston conference that has come to be known as the Davos of the energy world. The other economists agreed.

The good news: “All economic crises end,” he said.

The bad news: Rogoff’s forecast was the most optimistic .

Nouriel Roubini, an economist with New York University’s Stern School of Business, predicted an “L-shaped stagnation” similar to what Japan suffered in the 1990s when that country lost a decade of economic growth.

Roubini offered a caveat, though — when the financial crisis hit Japan it was a nation of savers with a current-account surplus. The U.S. has neither of those advantages.

Roubini, who’s been labeled “Dr. Doom” by some, said the stimulus package and bailout plan is needed but comes at a huge price.

“It’s not a free lunch. We have to finance it. Let’s not kid each other,” he said. “We need a stimulus, but the cost of it will be massive down the line.”

But Rogoff said the stimulus plan could turn out to be worse than doing nothing if President Barack Obama’s administration doesn’t get its act together and fix the banking system.

He likened the trillion dollars as giving a blood transfusion to someone who’s bleeding to death without fixing the reason they’re bleeding to death.

“It makes it easier to fix the banking system if they’re going to fix the banking system,” he said. “Otherwise it’s worse than nothing.”

Nariman Behravesh, chief economist for IHS Global Insight, offered the most positive outlook of the night, although it could hardly be classified as bright.

“This is the Great Recession. It is not the Great Depression 2.0, and it is not Japan’s lost decade,” he said.

Behravesh predicted a modest rebound starting in 2010 with the possibility that crude oil’s benchmark price could go back up to $50 or $60 a barrel.

Roubini would not predict where oil prices could go past 2009, but said a slump closer to $20 a barrel this year would not surprise him.

He scoffed at the idea that either $140-plus oil this summer or subprime mortgages could have caused the sharp downturn in the economy, citing myriad debt loads from over-leveraged banks to bad student loans to credit card debt and government bonds as the primary drivers.

Roubini predicted job losses have only just begun and will continue through 2010. Whether an economic turnaround is possible in 2011 or 2012 depends entirely on how policymakers do their jobs, he said.

Harvard’s Rogoff said the hubris of officials to think that the U.S. could continue to borrow two-thirds of the world’s savings year over year without ever having to deal with that debt was “utterly delusional,” adding, “The political system can’t get its head around the problem.”

“2009 is a lost cause. We’re working on 2010 here, but if they don’t do anything in the next couple of months, 2010 is going to be a lost cause, too.”

62 Responses to “Top Economists Agree 2009 Worst Financial Crisis Since Great Depression”

BobFebruary 15th, 2009 at 5:32 pm

Roubini, nice to see you now at the ‘L’ shaped recovery. We need an update from you on the chance of a Depression. Last I recall you stated 30%. If you hae now moved to an ‘L’ shaped recovery I would imagine you are now at least at 50% for a Depression.BTW, Geithner is the one who needs to move the fastest not Obama with the stimulus/debt plan.Are you seeing 7 to 10 million more unemployed in 2009?Thanks again for letting us red your work!

GuestFebruary 15th, 2009 at 5:34 pm

Dr Paul Hein, author of “All Work & No Pay,” asks a question regarding the “stimulus package”:[A] question arises, at least in my mind: how can what was obvious to a bunch of kids [with a lemonade stand knowing instinctively that the potential customers to make such a venture profitable just didn’t exist} be so unapparent to our nation’s financial geniuses?An answer presents itself to me, and I should probably keep mum about it, but I won’t. Here goes: the powers that be WANT the economy to fail. Why? That’s a good question, but I can only speculate about the answer. What is clear, however, is that economic collapse seems guaranteed if the stimulus package is implemented, and those advocating it must surely know it.The Titanic struck the iceberg by accident. The captain didn’t aim for it. But the planes striking the Twin Towers were directed toward them. The crash was purposeful. You can ask “Why?” but the deliberate nature of the act cannot be denied.It is remarkable that people who wouldn’t trust a used-car salesman, or TV huckster, any farther than they could throw them, will nod in serious agreement with bailout salesmen, and stimulus hucksters, even though these shills have demonstrated no great capacity for honesty, integrity, or righteousness.I guess we get what we deserve. Or worse.http://www.lewrockwell.com/hein/hein204.html

Helge NomeFebruary 16th, 2009 at 10:54 pm

Spot On! The timing of the bursting of the bubble was fully planned and was initiated by the 9/11 event. The whole idea is to transfer the ownership of real wealth owned by us all into the hands of a small group of manipulators that can be referred to as the World Spider. The coming depression will prime people into an acceptance of a major international conflict with its epicenter in the Middle East.The Taleban is currently being built up with financial help from the World Spider in order to destabilize the situation in the Middle East (Not unlike the way Hitler’s National Socialists were supported before they came into power).This will provide a rationale for a major attack from the west with a view to replacing the Islamic regime in Tehran. The ultimate aim is to isolate Russia and get control over regional oil and gas reserves.

JPBFebruary 20th, 2009 at 3:26 am

Spot on ! But, guys, just read Nexus magazine… They want to create a world government with a unique currency, to enslave people … it’s the modern version of the Middle Age, just a little more subtlety because of the internet. The only way people will accept the ruling of a world government and give up their currency is when their home and kids are in danger, and the only way to do this on a global scale was through the economy. They did a magnificent job, and don’t believe for a second that they did not see it coming because, even if they did not, they had been warned and did not act. They may not be Nobel Prizes but they are intelligent enough to understand it when someone like Roubini told the Congress years ago.If you accept one second that they are not idiots, then you will see how wonderfully planned it is, and it started with 9/11, which, if you also look at the evidence, has been planned by the US gov (who used Al Qaeda as a tool and a scapegoat) to start the terror process.Just look at some comments at Davos, saying that the European governments fighting for themselves was counterproductive, or some non-Euro nations regretting not being part of Euro … someone will come up some day with THE solution : one governement for everyone hence one currency … and this is how they will get rid of the huge US debt.Do not think for a second that the most powerful country in the world will let its currency be debased because that would mean that hoards of Chinese will come and buy everything. That has zero chance to happen, they will come up with something, and they already have a plan. And to make it work, they have to go much further in terms of financial and economic destruction … there will be blood in the streets.So, the ones that have to act FAST are not the people in the government, but the people of America. Open your eyes !But I am afraid that that will never happen, because people are notoriously more worried about themselves and ready to let their neighbours die. Darwinism has a high price to pay.

HayesFebruary 15th, 2009 at 6:11 pm

Good News – Administration to lighten up on tough talk about bankster compensation – only the banks that get significant money will be scrutinized – I am glad to see they came to their senses –

GuestFebruary 16th, 2009 at 1:31 am

Yes, this is how they’re going to get rid of top management, who will not be willing to work for that kind of a deal. They’ll all be gone within 3-6 months. Time to hire plow horses, not race horses.

GuestFebruary 16th, 2009 at 6:58 am

The only horse racing we’ve all seen has been of the rigged variety. I’d much rather watch horses plow than watch a rigged horse race.

amacflyFebruary 16th, 2009 at 9:35 am

Plow horses and pitchforks now!It is the over paid, over egoed MBA ‘race horses’ with nothing but greed in their veins who’ve created this mess, they should all be thrown out. The system of the economy should serve the people, this Rockerfeller/Rothchild usury/debt-slavery is destroying our nation. We need to end the senseless and selfish greed of these ‘financial race horses’ and return to a slow plodding honest banking system. Those race horses aren’t Bill Gates, Steve Jobs or Michael Dell. They are doing nothing for our country except making the richest families in the world richer in Wall Street. If they really are so smart they should be doing something to turn around the manufacturing base of this country.This presentation given at Trinity Church in Wall St is the most refreshing thing to come out of this scandalous ‘land grab’ by the king-pin banksters who are managing this to steal every last cent from all of us. http://www.trinitywallstreet.org/calendar/index.php?event_id=42759

AnonymousFebruary 15th, 2009 at 6:11 pm

Robert Reich – the little dwarf – had it right for once; beginning in the 1970’s globalization and technological advance made the standard of living of the American middle class unsustainable. Since both are irreversible and credit cards and other forms of debt are maxed out we are going to see a PERMANENT DEPRESSION in the United States…and maybe much of the developed world UNLESS wars of annihilation are waged against the third world.Add to this the pressure of global warming, peak oil and general resource exhaustion, and third world identification of Jews as racists (when in fact it is the dark skinned and Muslim who are the racists), and the future looks bleak indeed.

Jason BFebruary 15th, 2009 at 8:51 pm

I guess by August we’ll see if you’re right.I hope you are, but I think you’re not.But no one has ever won betting against the United States.

guestFebruary 16th, 2009 at 9:50 am

History won – the USA fought those wars without reason. It may have claimed they were justified, but with clear reason none would have been undertaken.Vietnam tied the French in knots for a century, and they fight dirty. Afghanistan and Iraq both confounded the British by being unrulable for over a century. Russia ran a full invasion in support of an elected regime for a decade, and left with tail between its legs, so what makes an even more distant occupier think that this time it will be different for them?They didn’t use reason, all they thought about was money. The Carlyle Group and Haliburton waged these wars to take our money, and ‘secure’ all that oil for their big oil buddies who donated so generously to their campaigns and GOP. This is fraud at the highest level – and don’t talk to me about 9/11, the twin towers didn’t fall by airline impact or jet fuel fires, thermite brought those buildings down from the base in a perfect controlled demolition.

CWFebruary 15th, 2009 at 8:24 pm

I think we’ll spend a trillion and not be that much better off for it. Inflation with rise because of the extra paper circulating. Unemployment will rise, it’s called stagflation. The issue is the minds and hearts of Americans need to change from me-me-me to us-us-us and I just do not see that at all yet. It appears as if much more pain is needed to bring about this change. The last time it took a major world war which may happen if the entire world sinks far enough down which is happening right before our eyes. The real danger is because of crazy economic circumstances a mad man is allowed in to power some where in the world.My guess is at least 15 to 20% of the money spent will end up in fraudulent transactions and high end looting. The big boys are steeling from us already…The outlook for the next few years does not bright at all. This is not like money gets pumped in and everything changes in a 3 to 6 months, major changes of mind and heart of a people can take a long long time. If every thing goes well I see good times in perhaps 10 years. The stimulas may stop the collapse for 6 months to a year, but it will not change the patterns or realities that have come to be the American way in the last three decades, only time and pain can do that.It’s sad, but I think we’ve last the next few decades in a matter of a few years.

amacflyFebruary 16th, 2009 at 9:57 am

all the king’s horsesand all the King’s mencouldn’t put Humpty together again.CW, I agree with you totally, my fear is that this is the country where that crazy could most easily come to power, remember that Sarah Palin was not just a bad joke, she was a real live possibility with huge support from the great uneducated.

DonBFebruary 15th, 2009 at 8:31 pm

Prof Roubini… Please provide your view on the stimulus plan that Obama will be signing this week. I know that you have said that a sizable stimulus is necessary, but is the structure and size of this one up to the job?

GuestFebruary 15th, 2009 at 9:11 pm

This economic crisis is not Japan 1990s, or the “Great Recession,” or the Great Depression. This is a sea change. Obama with his Democrats’ Stimulus Package is going to fall flat on his face, I’m afraid, and fast. It would be one thing if this were a package of public works and printed money to be wasted a la FDR.But this is pork, a la Reid’s high speed rail link between L.A. and Vegas, a five-year spending boondoggle. This is a suicide pill concocted by a House of Fools. And they’re trying to force it down the people’s throats and people are screaming.This is drama – an American tragedy. The Republicans are the opposition villians, having turned the offering down twice in both the House and Senate – all but for the usual three turncoats – not because they are statesmen, but because they know the stimulus is going to fail. And they’ll be the beneficiaries; they’re going to make political hay.Obama, I’m afraid, looks a bit of a fool; he knows zip about what’s in the package. On radio today I caught a snatch of the ongoing stimulus debate, particularly regarding Obama’s East Peoria snafu. I guess as everyone knows by now, Obama has an economic team of advisors from industry, and one of those members is the CEO of Caterpillar, Jim Owens. Obama in his speech at the Illinois plant kept calling the CEO by his first name and said that when the stimulus hits, well, Jim will be able to put some of the 22,000 folks back to work who’ve just been laid off by Caterpillar.So the press asked Jim after the president left the event if this was so, and Jim said, no, Caterpillar wouldn’t be able to do that, and that the truth was Caterpillar was going to have more layoffs.And, dang, if The Big O didn’t repeat the same claim the next day. It’s all on ABC News’ Political Punch Blog: “D’oh! Caterpillar CEO Contradicts President on Whether Stimulus Will Allow Him to Re-Hire Laid Off Workers.”You see, there is nothing in the package to put Caterpillar back to work – instead, it’s all greeny stuff nobody wants (Ford, with a better clue, is in collaboration with Harley-Davidson motorcycles with the introduction of a new 2010 Ford Harley-Davidson F-150 that “image buyers” will buy). Apparently, the smartest president in the world doesn’t know the difference between, as some say, earthmovers and a shovel. Or, just maybe, Nancy Pelosi didn’t let him read the bill, either.http://blogs.abcnews.com/politicalpunch/2009/02/doh-caterpillar.html

AnonymousFebruary 15th, 2009 at 11:30 pm

The Republicans are the opposition villians, having turned the offering down twice in both the House and Senate – all but for the usual three turncoats – not because they are statesmen, but because they know the stimulus is going to fail. And they`ll be the beneficiaries; they`re going to make political hay.LOL-They help create this mess over the last 8 years(or more)and all “they” do is run interference and obstruction against the American people while protecting their own “interests”.If it fails it will be because of their obstructionist meddling and interference.They are protecting their empires and their ties to them. The whole world knows it.Obama has only been in office a little over 26 days now. There is no way anyone in their “right” mind can hang this collapse on him, but of course when all you are doing is protecting crumbling political and financial empireswhich are BROKEN models within a BROKEN system do you really expect them to be concerned about the American people?The Paradigm is Lost and it can`t get up.

GuestFebruary 16th, 2009 at 9:54 am

You really don’t get it. There is only one party with two factions. The one party is run by the big banks and they play one faction against the other with the Oligarchs always coming out on top and the American People the losers.We do not have a free democratic Republic. We have a Plutocracy run by Oligarchs that give you the illusion that you have free choice. You only get to chose between one of their fronts. Not to dissimilar than the way China or Russia are run. Most Americans are just in denial fed by a wonderful history that has been co-opted by the elite and fed to you as if what our past represented was still true. Now we do torture and tap phones and the poor fill up the prisons while the wealthiest hardly every go and when they do it is for a short time and in a country club.Open your eyes!

GuestFebruary 16th, 2009 at 12:21 pm

Thank you! I am growing weary of seeing all of the dem-vs-rep finger-pointing. It is driving me crazy. They all work for the same people, and it’s not the general public!

amacflyFebruary 16th, 2009 at 1:20 pm

I wish there was more in the press about the scam that is the Federal Reserve. A privately owned bank running a legalized usury scam on this nation. Why don’t we hear about this in the press? Because those same families, and their corporations own the media. It is so sad seeing all this unfold, and even sadder to realize that these families will most likely get away with this insane land grab as they own the politicians, police and military.The American people are blind o it, yet the information is out there, how the Fed was formed, by whom, and how much they each own. I’m sure everyone here has read The Creature from Jekyll Island by Edward Griffin.

GExpatFebruary 16th, 2009 at 1:45 am

Are you kidding? You write as if the Republicans are honest, trustworthy, and knowledgeable. They are opposing this bill not because they think it won’t work (they could balance their checkbooks without cash infusions from lobbyists themselves), but because they are spoiled, angry children who are not longer in control. It’s a temper tantrum.And before you start calling me a communist, Al-Qaeda loving fascist (Gotta love bush’s command of vocabulary and his grasp of history), know that I believe ALL of Congress should be lined up and shot for what they have perpetrated on the American people.

BrianFebruary 15th, 2009 at 9:22 pm

I haven’t seen anyone on this board mention California yet.I think there is a non-zero risk of California declaring bankruptcy this week. Any CDS contracts out on the state?A CA bankruptcy could be the trigger for a collapse. Municipalities and suppliers would crater. Other states and Muni’s would have their credit ratings slashed.Just keeping an eye out. We’ll see what happens…

GuestFebruary 15th, 2009 at 9:53 pm

Schwarzenegger tried Sunday to salvage a proposal to close California’s $42 billion deficit after an all-night legislative session failed to produce a new budget.The broad outlines of the latest budget proposal have not changed for several days: $15.1 billion in cuts, $14.4 billion in temporary tax increases and $11.4 billion in borrowing.The budget crisis is dire: tax refund checks and payments to state vendors have been delayed; some 2,000 public works projects have been stopped because the state has no money to pay for them; and California’s credit rating is so bad the state can’t get loans.

amacflyFebruary 16th, 2009 at 1:36 pm

Because we the residents won’t let them, they can’t tax us without a vote by the people. Thank God our state is still a democracy, not a dictatorship – yet!Besides, house prices here have cratered, in some areas down 50% already, and we still aren’t at the bottom by any means, so muni & state revenues have been halved by that alone, then add to that the contraction in spending, building, permits and you get the picture, the flow of available revenues could be down by a staggering 65-75% by the middle of this year. Whose gonna loan you a dime on your muni or state bonds against figures like that?I haven’t followed the proceedings in Sacramento, but if the state really does go broke that will be a hell of a sobering wake up call for the world, we were the seventh richest economy on the planet just four years ago!

Jason BFebruary 16th, 2009 at 3:12 am

Based on this articlehttp://abclocal.go.com/kgo/story?section=news/politics&id=6659127I guess they’ll find the votes to pass the tax increases and get the budget. But revenue will continue to disappoint as economic conditionds continue to deteriorate, and Cali will be in the same pickle again in a few months. Remember the credit suisse arm reset graph, the next wave hits this summer, as does a wave of retail filures and commercial mortgage failures. Its a non zero chance, increasing throughout the year.Yes, CDS and derivatives are like old wet dynamite. Cali bankruptcy could set them off, as could GM BR.

GuestFebruary 15th, 2009 at 10:14 pm

Cash crisis forces California to free 55,000 prisonersThe debt-ridden state can no longer afford to keep inmates in an expensive and bloated penal systemBy Guy Adams in Los Angeleshttp://www.independent.co.uk/news/world/americas/cash-crisis-forces-california-to-free-55000-prisoners-1622487.htmlOrlov was right on that.

GuestFebruary 16th, 2009 at 6:54 am

Do you know how many pot smokers and people who didn’t pay their child support are locked up in prison. I mean it’s ridiculous how many people are locked up in this country, it’s called run away judges and run away conservative fascism! Hey you ran a red light you need to spend a year in prison, hey you talked back to a judge you need to spend a couple years in prison. I’ll be thankful once these states run out of money and these judges lose all their power that they regularly abuse!Right now we’re all witnessing the consequences of power being abused all across the board!

economicminorFebruary 16th, 2009 at 10:00 am

And people who drive with out insurance more than once become felony offenders. Being poor is a crime in this country that is justification for imprisonment. You are required to have papers that all cost more than most of the poor can afford and when you repeatedly don’t, you go to jail.And when you are poor and abused and have mental issues and self treat with drugs or alcohol or both, you also go to jail.But if you steal a widows pension you either get away with it totally or get your wrist slapped. If you take money from the elderly, that is OK, it is entrepreneurial.

GuestFebruary 16th, 2009 at 11:03 am

The United States of Double Standards; if you are poor the laws always apply to you; if you’re rich, they rarely do!

AnonymousFebruary 15th, 2009 at 10:39 pm

Bill Moyers interviewing Simon Johnson…………….A Must watch.http://www.pbs.org/moyers/journal/02132009/watch.htmlBtw….. If I didn’t know any better I could think that the current climate of political indecision to do the right thing with the big banks – which is to break them down into manageable pieces and nationalize them – stems from a shadowy conjecture that these same big banks are ultimately being supported by the past and current administration in order to eventually and essentially empower them to swallow up every small community bank in the U.S. as the Great Recession takes further hold in the coming months.My thought here is that this is a race against time as to who can last the longest. I have no doubt that it is a game of financial armageddon, an end game in which the big banks will outlast the smaller ones due to government intervention on their behalf as these same small banks will not be able to survive during this evolving and worsening economic crisis without like assistance from the Feds. In effect, the FDIC will NOT have the funds available when all is said and done to rescue these community banks AND also cover the big banks simultaneously. One is doomed to die. I know which one it will be.Does anyone here think that from under all the indications given to date by the administration, press, the President himself, that these big banks will not be allowed to wither away under the official pretense that for the sake of the nation’s security the deposits and assets of said community banks are hereto moved over to the likes of Bank of America, Citibank, and the Goldman Sachs of this nation?I may be ultimately proved to be foolish but if my conjecture is correct my deposits are better off left in the Bank of America at this time rather your small town Mayberry Bank of the U.S. We shall soon see if I am correct indeed.AM

faithFebruary 15th, 2009 at 11:26 pm

I think most of the money that is going to be spent by the stimulus will be wasted.It is only based on consumption and this type of spending will cost a lot more than we can calculate in the long run when it is time to pay back.From the beggining of the crises most of the people accepted that as a liquidty crise or credit crise, but what we have is a banking crises. As if we have credit now as we could have 2-3 years ago everything would be sunny immediately.Our banks created the biggest bubble of the history of mankind and this bubble has to burst now, and it will only be effective if we let the banks go down.The governement should have spend the money on Nationalization of the Banks which would take more money definately as Roubini predict somewhere around 1,6 trillion dollars.Almost double the size of stimulus package, but at the end the governement would have the banks after the banks would be cleaned up they would have some value.Although i believe the governement should run the banks with market competitiveness, it shouldnt mean free credit for everyone cause they been nationalized.Stimulus is not going to make companies in usa to hire new employees.No company will hire under those circumstances but i believe it will make it easy for countries who export to usa have a better year and also increase the demand for oil.It is just money created for consumption , wont help to solve any problem we have now.We have to start with the banks , they are the hearth of an healthy economy .As long as we have those zombi banks even though we make 10 more years 10 new stimulus wont change anything.

Hugo PenteadoFebruary 16th, 2009 at 5:01 am

The economy can not be bigger than the planet. This is our major mistake, the rest is only consequences to satisfy our greed.

peteFebruary 16th, 2009 at 5:06 am

Ok, globalized world, globalized crisis but:1) are there countries that you believe are better placed to face the crisis (more proactive and seating on solid -or more solide than others- fundementals? and2) are there countries better placed to lead to sustainable stable growth, short and long term?what about the likes of Norway, Australia, Sweden, Denmark, Finland, Switzerland, Canada, France, New Zealand, Brazil…Also we may have to consider also cultural factors… E.g. Italy has a uge debt… but no private debt, uge savings… lot of small banks, and family has a pivotal role… lot fo them leave in the same house from grandpa and grandma, leaving with mom and dad, with grandpa and grandma… sharing all the costs, no mortgages… for sure the lates alfa, latest armani clothes etc… but irrelevant compared to what other single persons are facing around the world. and italians are happy with wine, pasta, and soccer and being close to mom… having every meal all together with all the family… houw much cultural factors (not measurable) can influence the ability to face the a crisis or just to have a ‘positive’ attitude towards it and suffer less than others?

GuestFebruary 16th, 2009 at 6:42 am

It’s pretty surreal and almost shameful that we got to a point where we became so dependent on the exchange of currency and debt that we’re vulnerable to such scary times. Just remember people survived and had families and lived their lives for thousands of years with out all of the convenience we’ve come to expect. Isn’t that what we’re really all terrified of is losing our conveniences?People will survive this depression especially the smart ones but depending on other people thousands of miles away may have turned out to be completely foolish and destructive to our planet and local economies. When push comes to shove we’re all gona find out it’s our neighbors and local friends that can be of real help and support to us. Globalization is meaningless it has no value, it is a fanciful concept that without free and clean energy is unfeasible.

GuestFebruary 16th, 2009 at 9:19 am

You asked -what about the likes of Canada?Let me share a few thoughts:1) Economists agreed that Canada is doing better.2) Canadian banks are not loosing share prices as the other global ones.3) No bailout for banks, yet.Lets consider the “man in the street” facts……Over the last 3 months:a) 4 of my relatives have been laid off. Plant closings. Thats 4 set of mortgages to worry about.b) 6 of my coworkers spouses are either laid off or will be this spring (they work for auto industry)c) My neighbours – on one side both husband and wife are out of a job. On the other side, the wife is laid off.Its NOT VERY PRETTY PICTURE. We are falling like Japan. Fast, very fast.The crap is all over my friend.Good luck to you folks, and to us also.

AnonymousFebruary 16th, 2009 at 11:44 am

3) No bailout for banks, yet.wrong. FLAHERTY just doesn’t call them bailouts. Remember the 300m Canada injected a couple of times?(it was larger per capita than the US) also note that the banks (Canadian) are diluting their shares like crazy. Why do you think a bank would do that? Maybe because they have a better idea than shareholders to of what is on their balance sheet?If you were a bank, why would you first off take flaherty’s money and then massively dilute your current shareholders who have already lost 40-70% of their investment if the banks are doing fine?Answer; they are not doing fine. we just cover it up better, even though the mint is still owned by the gov’t unlike the fed in the US where it is not owned by the gov’t.

JaboFebruary 16th, 2009 at 6:58 am

Remeber the other US fraud before the dot.com fraud with the S&Ls took 800,000 billions USD this super ponzi Madoff & Co & the like, will take several times above this figure, hurry up to pour more money don’t be greedy. Besides, private benefits, taxpayers losses. How neat!

Raymond NgFebruary 17th, 2009 at 6:40 pm

In this economy, it is not hard for any economist to say the worst is yet to come and more doom days are ahead of us. It is like the chance of making money nowadays in stock market by shorting bank stocks are sure bet.I’m really getting tired of many of these politicians and economist telling us what is happening over and over again. We all know what is happening – the economy is in intensive care, and what is going to happen if nothing is being done on the bank and housing issues – the economy will go to the morgue instead.As a citizen as well as many others, we all want to hear solutions. For example, to Dr. Roubini and the other 2 economists mentioned above, I want to hear what is the practical solution, point by point, to our crisis In US based on our current situation in all aspects – national debt, deficit, bank liquidity, housing, capital spending, consumer spending and credit…etc.

g AntonFebruary 19th, 2009 at 11:08 pm

Carlos Slim (world’s richest man) VS Filipe Calderon (the President of Mexico)The article states: “It is now clear that this is the worst financial crisis since the Great Depression.”Well, to me it’s not clear that the current situation is not a “worst financial crisis” than the Great Depression. The situation certainly has that potential.It’s interesting that in a situation like the current one, emotion and political expediency usually out-weight logic and common sense. My opinion is that excessive optimism and the refusal to accept reality in an economic situation like the current one can be extremely harmful.An interesting episode occurred here in Mexico illustrates my point. There are going to be federal elections here in July, and President Calderon is assuring everyone that the worst part of the financial crisis will be over by late summer (after the elections), and by the end of the year the Mexican economy will be humming along (this despite current downward trends in petrol prices and production, tourism, money set home by Mexican workers in the US, employment, manufacturing output, GDP, value of the peso vs the dollar, etc., etc.).I think that Mr. Slim has been reading Dr. Roubini. Anyway, Mr. Slim wrote a very good Dr. Roubini-like analysis of the Mexican economy. I would find it hard to disagree with anything that was said. I read Mr. Slim’s piece in “El Financiero”, but I’m sure that the article was widely published and commented on.The very next day, Mr. Slim was widely and very bitterly attacked by President Calderon’s underlings. The attacks were not only against what Mr. Slim wrote, but some were very personal in nature, and Mr. Slim was characterized as a “catastrophist”.The one area where Mexican journalism is superior to that of the US is political cartoons. My favorite regarding this episode has a skin and bones, emaciated patient with bulging eyes lying in bed (the Mexican economy). He is being attended to by two doctors–Dr. Slim and Dr. Calderon.Dr. Slim tells the patient, “I don’t want to be a catastrophist, but you’er going to die”.Dr. Calderon then tells the patient, “Don’t listen to him–I’ll have you up and running around tomorrow”.

economicminorFebruary 20th, 2009 at 11:43 am

Worth reading IMHOtp://www.financialsense.com/editorials/quinn/2009/0218.html”>THE BURNING PLATFORM/A> by James Quinn

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