Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability. Even if necessary changes in policy are implemented, the odds now favour a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond.

Laymen can only take a giant like Summers at his word when looking at the statistics. You know he’s done his homework.

Undergirding Summers’ newfound pessimism is mega-bear Nouriel Roubini, who’s been sounding the alarm since my final year at SAIS (2005). In a particularly frightening rambling essay, he says the coming recession could bring the S&P500 down as much as 28%.

It’s times like these that I’m glad to be poor and without equity.