American economics professor Nouriel Roubini, who predicted the current financial crisis in 2006, stated on Tuesday that the United States will suffer the worst recession in the last 40 years, and stock market growth will “extinguish”.
"The danger of a downturn for the markets and the economy is great and we will be surprised by the severity of the recession and financial losses", said Roubini, a 50-year-old economics professor at New York University in an interview with Bloomberg TV. According to his forecast, the recession will last 18 to 24 months and will increase unemployment to nine percent, while already depressed housing prices will fall by another 15 percent. The U.S. government will need to double its investments in purchasing equity stakes in banks and force creditors to suspend dividends to avoid bankruptcy, Roubini said.
Treasury Secretary Henry Paulson announced on Tuesday that the government plans to invest $250 billion in shares of financial companies to stimulate the thawing of the credit market that threatens business operations and jobs. "This will be the first phase of bank recapitalization. The government must decide to intervene much more directly in securing loans and managing these companies", Roubini said.
American stocks on Monday saw their largest single-day point gain in seven decades, thanks to investor confidence in the government plan and the intervention of the central bank, the FED, which injected massive amounts of dollars into the global financial system. (H)
