In A Nutshell
Just in case anyone wants to pay attention to one of the few public voices that long ago warned of this financial crisis, here's what Nouriel Roubini says must be done:
Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:
- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;
- massive and unlimited provision of liquidity to solvent financial institutions;
- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;
- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;
- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.
At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression.