Emergency Rate Cut Helpful But Not Enough

11/08/2008 05:12 am ET | Updated May 25, 2011

Believe it or not, there's an economist out there who saw this whole train-wreck coming: Nouriel Roubini of New York University. He stopped by Yahoo TechTicker this morning to give us his latest thoughts. As usual, he wasn't encouraging:

The coordinated global rate cut was helpful but not enough. The central banks should have cut at least 100 basis points. World governments should also immediately band together and put together a comprehensive plan:

* Guarantee all bank deposits (not just up to $250,000, not just in US)
* Triage the banking system: recapitalize survivors with equity injections, let the rest die
* Dump Bernanke and Paulson, who the public has lost confidence in
* Get ahead of the crisis instead of looking panicky and reactive
* In US, put together $300 billion fiscal spending plan (a new New Deal) to begin to replace the coming collapse in private spending

None of this will stave off a severe recession, unfortunately. It will merely head off a collapse of the financial system.

Roubini thinks the stock markets will fall 50% from the peak (vs. the current 35% and his original forecast of 40%), which actually doesn't sound so bad right now. Inflation is no longer a risk, says Roubini: In six months, we'll be worried about global deflation.

Nouriel's a great guest, but after interviewing him you always feel worse.