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-- continued negative economic surprises;-- "a major surge in corporate default rates;"
-- a weak recovery "as the recession becomes severe" and credit spreads widen;
-- "the risk of a CDS (credit default swap) market blowout as corporate defaults" spike;
-- hundreds of hedge funds collapsing; liquidation of their assets and the toll on financial markets as a result;
-- major insurance companies in trouble;
-- "a slow motion refinancing and insolvency crisis for many toxic LBOs;"
-- "the risk that other systemically important financial institutions are insolvent" and need expensive rescue packages;
-- the continuing vicious circle of falling asset prices; the result of ongoing deleveraging into illiquid financial markets;
-- growing numbers of margin calls as asset prices fall; cascading them lower as a result;
-- the continuing housing slide "pushing over 20 million households into negative equity by 2009;" and
-- the risk of an emerging or developed country experiencing a severe financial crisis; much like Iceland in recent days.
Roubini calls the last factor "crucially important" and cites about 12 or more emerging economies "in serious financial trouble." Especially in Eastern Europe, including Turkey, but also Korea, Indonesia and Pakistan. The risk of contagion is worrisome as even tiny Iceland (population 300,000) sent tremors globally.
Overall, risks and vulnerabilities remain. They're growing, not receding. Not a hint of resolution is in sight and observers expressing near-term optimism need a reality check. The best to hope for is a severe, protracted recession. Most likely globally. Further, inadequate measures are in place, and more corrective ones are needed to avoid an economic meltdown. The longer they're delayed, the worse conditions will get.
Globally we have a severe recession combined with a financial and banking crisis. The result of the largest ever leveraged asset and credit bubbles. Multiple ones in housing, mortgages, credit, equities, bonds, commodities, private equities and hedge funds all simultaneously imploding. There's no simple or easy way out of this and overwhelming risks of something much more serious loom. Unmentioned in daily business news reporting that instead touts a market bottom and a great time to buy stocks. Leaving unexplained the risk of doing it in a very hazardous climate.
People today should be cautious and demand far more from elected officials than they're getting. Critical times like these require radical measures. So far only handouts to Wall Street. To fraudsters through what economist Michael Hudson calls a "con game (and an) unprecedented giveaway of financial wealth." What financial affairs author Ellen Brown brilliantly explains this way:
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