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Roubini: stocks down another 20%, emerging markets to have hard landing

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Uh oh, the Wall Street cheerleaders won't like hearing this. They hate when reality gets introduced and the "prosperity is just around the corner" meme is challenged because that doesn't help the love affair they have with Wall Street. Whoever brought Roubini on the show from Davos is probably in hot water today. Either that or they're scrambling to locate Jack Welch to talk about the good old days of the Republican economy and how the GOP really knew how to help business. As long as they don't mention Jack's own luxurious decorating habits and his platinum parachute, everything will be fine. Onto the crazy guy who obviously doesn't know anything about economics. (Video interview inside as well.)

US and global stocks are still likely to fall because the corporate and economic news will be worse than expected, Nouriel Roubini, RGE Monitor Chairman, told CNBC.

Investors will be hit by the realization that many banks are bankrupt, that companies will have to rein in debt and sell assets and that emerging markets may get into trouble, Roubini said.

"I think that there's a 20 percent downside risk to US and global equities," Roubini told "Squawk Box Europe."

The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that "banks are getting the money and they are hoarding it, they're not lending it," because they expect higher losses.

There is no safe haven from the crisis as all countries are affected, and the collapse in aggregate demand may bring about prolonged deflation, Roubini added.

"We have to worry today about not ending up like Japan. That's the risk for the global economy," he said.

The rise in the price of gold is a signal of fear that countries and corporations may default on debt rather than of worries about future inflation, and the precious metal is used as a "safety valve."

Falling stock prices and very low bond yields are signaling depression, while credit spreads are still very wide, indicating fear of defaults, according to Roubini. And even the fast-growing Asian economies aren't spared.

"If you look at the data in emerging markets and around Asia, East Asia, there is a hard landing," he said. "All the numbers out of China suggest… the manufacturing sector is already in a recession."

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