I Think We're Turning Japanese

Roubini's latest column is another must read, but the bottom line is this: (emphasis mine)

Thus, even if the US were to do everything right and fast enough (on the monetary, fiscal, bank cleanup and household debt reduction) we would still have a severe two year U-shaped recession until early 2010 with a weak recovery of growth (1% or so that feels like a recession even if you are technically out of it) in 2010-2011. But if the US does not do it right this severe U-shaped US and global recession may turn into a nasty multi-year L-shaped near depression like the one experienced by Japan. We don’t have to go back to the Great Depression (when output fell over 20% and unemployment peaked over 25%); even a stag-deflation and Near-Depression like the Japanese one would be most severe for the US and the global economy. And while six months ago I was putting the odds of this L-shaped near-depression at 10% or so such odds have now risen to one third. So time is of the essence and the clock is working against US and global policy makers. The time to stop dithering is well past; and the time to implement a program of forceful, coherent, credible, globally-coordinated monetary, fiscal, financial clean-up and debt-resolution is now. The US and global economy are truly risking a near-depression if the policy reaction is not bold, aggressive, sustainable and credible.

The clock is ticking. It's looking less and less like Obama is going to be able to actually do anything about the coming depression other than try to soften the blow. The GOP certainly won't let him spend the kind of money he needs to spend, and of course he'll only get the blame when the current plan in Congress fails to do anything more than slow us down a bit during the 20,000 foot freefall we're in.

Folks, Roubini has been dead, solid right for the last several years. If he says there's a one in three chance of a "near-depression" on the way (and he's been hedging his bets on the downside) I would pay attention to the man. A global economic catastrophe is in the works, and we're rapidly approaching the systemic failure point of the US economy.

Remember, even if Obama manages to stave off a depressionary scenario behind door number one, the other two doors contain a multi-year recession that will still be the worst in generations.