Economy Blog » Systemic Breakdowns: Still Possible

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I should mention that although systemic breakdowns are rare these days, they’re not impossible, and I’m thankful to Nouriel Roubini for explaining over the course of 3,461 words today just how a global financial meltdown might happen. If you’re in the mood for bearishness, you know where to go:

A contagious and cascading spiral of credit disintermediation, credit contraction, sharp fall in asset prices and sharp widening in credit spreads will then be transmitted to most parts of the financial system. This massive credit crunch will make the economic contraction more severe and lead to further financial losses. Total losses in the financial system will add up to more than $1 trillion and the economic recession will become deeper, more protracted and severe.
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