From the WSJ Blog today: 

BearBlog: Goldilocks and the Three Ugly Bears

BearBlog takes a look at what Davos attendees say is in store for the global economy — and what they said last year.

Last year, Nouriel Roubini was the lone pessimist on Davos’ five-person opening economics panel. His colleagues predicted the world economy would continue to grow strongly without overheating, a rosy scenario economists dubbed “Goldilocks.” Mr. Roubini, chairman of Roubini Global Economics and a New York University economics professor, demurred. “Goldilocks is threatened by three ugly bears,” he said, predicting a subprime meltdown, an end to cheap credit and rising oil prices would bring U.S. consumer spending to a halt. At the time, Mr. Roubini’s “ugly bears” provoked more laughter than concern. But Goldilocks has already met two of those bears and signs are mounting that the third — in the form of a sharp falloff in U.S. consumer spending — could show up soon. “Sometimes people say about me that even a broken clock can be right twice a day,” says Mr. Roubini, who contends his habitually gloomy outlook has been, over the years, more nuanced than he’s given credit for.

Now, though, he’s unabashedly glum. “2008 will be an ugly year,” he says. The question of whether the U.S. will fall into recession is stale: “Now the debate is, how bad will it be? I think it will be extremely severe.” Financial-market conditions will get much worse: “When you add all the losses, not just subprime but also soon enough on auto loans, credit cards, student loans, leveraged loans and corporate bonds, we’re looking at $1 trillion of losses in the financial system.” These massive losses, he contends, mean “there’s a serious risk of a systemic financial crisis. Not just in the U.S., but globally.”He laments that his colleagues are still getting it wrong. “The consensus is behind the curve” on a host of topics, including the severity of the U.S. recession, the extent to which the rest of the world can continue growing as the U.S. slows, and the depth of the problems in the financial system. Global central banks’ massive liquidity injections last year helped grease money-market wheels but can’t tackle “fundamental issues of insolvency and regulation. [These problems are] systemic. They take much more than liquidity to resolve.”Pointing out that he’s been forecasting a global stock-market fall and that global markets slid sharply on fears of a U.S. recession this Monday, he predicts: “This is just the beginning of a serious bearish market in equities. Things will get much worse before they get better. I was right a year ago and I think I’ll be right again.”

— by Joellen Perry

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Indeed, this morning I was again - like last year - a speaker in the main session at the Davos WEF on the global economic outlook. This year - in addition to myself - Steve Roach also presented a very bearish outlook for the US and global economy.

In summary here are the main points I made at this session: