A Very Pessimistic Economist

Nouriel Roubini of the Roubini Global Economics Service has written a very pessimistic appraisal of the impact of the current housing slump. Here's his conclusion from an analysis of the recent spate of bad news from the housing sector of the economy:

So, the simple conclusion from the analysis above is that this is indeed the biggest housing slump in the last four or five decades: every housing indictor is in free fall, including now housing prices. By itself this slump is enough to trigger a US recession: its effects on real residential investment, wealth and consumption, and employment will be more severe than the tech bust that triggered the 2001 recession. And on top of the housing bust, US consumers are facing oil above $70, the delayed effects of rising Fed Fund and long term rates, falling real wages, negative savings, high debt ratios and higher and higher debt servicing ratios. This is the tipping point for the US consumer and the effects will be ugly. Expect the great recession of 2007 to be much nastier, deeper and more protracted than the 2001 recession.

Now it is going to be hard to decide whether Armageddon will begin with the collapse of the cease-fire in Lebannon or if it begins with the collapse of the housing market in America.