The "mother of all meltdowns"?

The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster

Comment: The above article (which requires a subscription to read beyond the introduction, is the basis for the following analysis.

U.S. recession: A classic 12-act tragedy
Page-turning plot reads like Shakespeare, driven to dramatic climax

The 12 steps:

  1. Home prices will fall 20% to 30% from the peak
  2. Prime and near-prime mortgages losses ($ 300 Billion more!)
  3. Consumer debt defaults will increase sharply
  4. The credit insurers rescue package is insufficient
  5. Commercial real estate loan market will deteriorate
  6. Some large banks with heavy mortgage exposure will fail
  7. Banks' losses grow as asset values drop further
  8. Once the recession gains speed, expect corporate defaults
  9. Unregulated 'shadow banking system' facing huge problems
  10. As recession spirals out-of-control, stock markets drop again (in a typical U.S. recession the S&P 500 falls about 28%)
  11. Credit crunch will dry up liquidity in many financial markets
  12. Massive global recession spreading, spiraling down

Conclusion: Can anyone stop this classic Shakespearean tragedy before the dramatic climax? Probably not, says Roubini.

Another summary article: Martin Wolf of the Financial Times on my "12 Steps to Financial Disaster"

My fear is summed up in this Chris Farley quote: "you'll end up living in a van, down by the river"


  1. Don't worry, bro. The Fed is "curing" this with another round of unrealistically low interest rates.

    Oh, wait a minute. That just sets the stage for the NEXT round. Never mind. :^)

  2. A minivan, if you don't mind sharing it with my five kids, and the fact that it's got 150k miles and is generally trashed.

    You might be happier in the back of my pickup. Don't worry, it's only a "heavy half," so it won't be TOO bouncy.


  3. Hi everyone! Since we are all being so cheerful and optimistic in this thread, let's talk about this:

    "Harry Koza in the Globe and Mail quotes Bernard Connelly, the global strategist at Banque AIG in London, who claims that the likelihood of a Great Depression is growing by the day.

    "In the United States, this new tipping point will translate into - get this - a collapse of the real economy, (the) final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the U.S. dollar fall. The collapse of U.S. real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down."

    These are just excerpts from this article. (I'm not claiming I agree with this or not; I don't know enough about them to know if they are legitmate or not. After all, people have been saying "the sky is falling" for years. Didn't the late Larry Burket, trusted Christian financial author, even have a book out with his version of the economic collapse several years ago? Anyway, this is where I found this article:


  4. The great news about this is that in hyperinflation, we'll be able to pay off our church's mortgage with our lunch money--and I could use a little bit of exercise instead of food, myself. :^)


Any anonymous comments with links will be rejected. Please do not comment off-topic