It’s Going To Get Ugly

Nouriel Roubini, sunny as ever:

“Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, driving the stock market lower after it rallied the most in seven decades yesterday.

“There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. “We’re going to be surprised by the severity of the recession and the severity of the financial losses.”

The economist said the recession will last 18 to 24 months, pushing unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs. (…)

Roubini said total credit losses resulting from the meltdown of the subprime mortgage market will be “closer to $3 trillion,” up from his previous estimate of $1 trillion to $2 trillion. The International Monetary Fund estimated $1.4 trillion on Oct. 7. Financial firms have so far reported $637 billion in losses, according to data compiled by Bloomberg.”

Back in my junior year of college, as I watched all the seniors writing their (mandatory) senior theses, I had a horrible thought. Like most people, my friends and I had had various crises in the course of which we asked a lot more of our friends than usual, and required a lot more generosity and indulgence. It suddenly hit me that while in the past all our crises had occurred separately, allowing everyone else to pitch in for the one or two people who were having trouble, during the spring semester of our senior year we were all going to have crises at the same time. (Writing a senior thesis is a crisis almost by definition.) Everyone would need more help than usual, and no one would be in a position to give it.

That was, unfortunately, how it played out. But it helped that I had seen it coming: I tried to scale back the demands I made on other people, and to use those moments when I had emotional resources to spare.

I mention this because recessions are like that, but on a national or global scale. Almost everyone needs help, and many fewer people than usual are in a position to give it. Not just material help, either: those of you who haven’t lived through a serious recession might not know just how much of a strain it is when everyone is hurting, no one can count on making it financially, nothing the country tries seems to work, businesses are shuttered, neighborhoods go dead, and couples all over the country stare at one another over piles of bills, wondering how on earth they’re going to manage.

And it lasts for years.

I think it’s going to get really ugly, in ways we haven’t seen for decades. It’s always a good time to try to be generous and decent, but never more so than when times are tough all around.

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