Driven deeper by vicious circle of losses fueling further losses SupportiveArgument #7157

A vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will engender a cascading and mounting cycle of losses and further credit contraction.
"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.

A near global economic recession will ensue as the financial and credit losses and the credit crunch spread around the world. Panic, fire sales, cascading fall in asset prices will exacerbate the financial and real economic distress as a number of large and systemically important financial institutions go bankrupt. A 1987 style stock market crash could occur leading to further panic and severe financial and economic distress."

Source: Nouriel Roubini
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▲Map HomeThe Global Financial Crisis
▲IssuePotential consequences of the financial crisis?
▲PositionUS faces severe recession
■SupportiveArgumentDriven deeper by vicious circle of losses fueling further losses
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Author: Nouriel Roubini
Cited by: David Price 11:32 PM Friday 10 October 2008 GMT
Also cited at: 7016
URL: http://www.rgemonitor.com/roubini
Excerpt / Summary
-monitor/253933/revisiting_my_february_paper_the_risk_of_a_systemic_financial_meltdown_the_12_steps_to_financial_disasterand_some_new_policy_recommendations_to_avoid_the_meltdown

"A vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy."
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Entered by:- David Price
Entry date (GMT): 10/10/2008 11:30:00 PM
Last edit date (GMT): 10/10/2008 11:35:00 PM
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