Prescription for Returning Financial Health and Calm to the Markets…

After listening to all the hype and panicky voices on all the major news media channels these last couple days, I finally found a voice of warning and reason that sounds authoritative and offers some ideas and hope for turning the global crisis around. I hope the G7 and World Bank leaders in Washington DC are listening to him.

Nouriel Roubini is my new guru on global economics as he has been the most proficient forecaster of economic events and fallout that I have been able to find or follow. This is from his blog yesterday (http://www.rgemonitor.com/blog/roubini/ ) and I felt his suggested actions worth repeating to whoever might be interested and listening for alternatives to panic and hopelessness…

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:

- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;

- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;

- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;

- massive and unlimited provision of liquidity to solvent financial institutions;

- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;

- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;

- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;

- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.