Thursday, October 23, 2008

Nouriel Roubini: Hedge fund could vanish Darwin-style

In a speech before hedge fund managers in London today economics professor Nouriel Roubini predicted a run on hedge funds that could result in 30 percent of the hedge fund assets disappearing in a "fairly Darwinian manner."

The impact on the stocks could be so severe that the market would have to be closed for a week or more.

Roubini predicted the current crash in 2006.

He predicts the worse recession in 40 years that will last at least 24 months in the United States. Roubini sees a vicious cycle occurring between the financial sector and the "real economy." Because of the tsunami of mortgage foreclosures, he suggests that the government help homeowners as they did during the Great Depression.

He sees a 40 percent drop in home prices, which would be worse than the Great Depression. And he thinks at least $3 trillion will be needed in bailouts to prevent a systemic banking failure.

Nouriel Roubini on Bloomberg TV

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