Mark Zandi, one of America’s most prolific economists, has come out with his “Event” thesis that the US economy is simply awaiting one more hedge fund collapse before a mass freeze on liquidity causes the global economy to slow down. He’s not going so far as to call it a recession, let alone a depression; rather, he sees some dark clouds on the horizon for the US economy, and they’re coming from the housing market.
MarketWatch.com: Subprime could create global crisis, economist says
With a “high level of angst” in the financial markets about who will take the losses from more than $1 trillion in risky mortgages, we could be just one hedge-fund collapse away from a global liquidity crisis, said Zandi, chief economist for Moody’s Economy.com.
A global meltdown is not likely, but the risks are growing, Zandi emphasized in a conference call with reporters following the release of a new study on subprime debt that concludes that the housing crisis could be deeper and last longer than investors now believe.
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