Roubini Says Forecast of Market Shutdown Coming True

By Ben Sills and Emma Ross-Thomas

Oct. 24 (Bloomberg) -- New York University Professor Nouriel Roubini said the suspension of U.S. futures trading today shows his prediction that markets will be shut down amid panic selling is coming true.

``This morning, even before the markets in the U.S. opened, the S&P futures fell by more than their daily limit,'' resulting in futures trading being halted, Roubini told a conference in Madrid today. ``What I said yesterday has already started.''

Roubini said yesterday that policy makers may need to shut down financial markets for a week or two as investors dump assets. Trading in futures on the Standard & Poor's 500 Index and the Dow Jones Industrial Average was halted today after declines of more than 6 percent. Trading of U.S. stocks would be suspended for an hour should the Dow Jones Industrial Average decline 1,100 points to 7,591.25.

``Things are getting worse, they are not getting better,'' Roubini said. There's an increased risk of a ``multi-year economic stagnation'' in the U.S. and ``we have a whole set of emerging market economies in trouble. Even a few of them going bust may cause systemic trouble.''

Russia's RTS exchange today stopped trading after stocks slumped more than 10 percent. Europe's Dow Jones Stoxx 600 Index slid 8.5 percent. The MSCI World index of global stocks has lost 45 percent this year as the fallout from the U.S. housing crisis toppled banks from Seattle to Paris. It fell 3.8 percent at 3:14 p.m. Madrid time today.

``Catastrophic'' Meltdown

In July 2006 Roubini predicted the financial crisis. In February this year he forecast a ``catastrophic'' meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.

Roubini said that the European Central Bank should provide ``much more monetary easing'' and governments around the world must put together a massive fiscal stimulus package after action so far failed to halt the stock-market rout. The U.S. bank bail- out plan will likely require between $600 billion and $700 billion, he said.

Roubini, a former senior adviser to the U.S. Treasury Department, said earlier this month that the world's biggest economy will suffer its worst recession in 40 years.

To contact the reporters on this story: Ben Sills in Madrid at bsills@bloomberg.net; Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net