Roach: Subprime ‘Dwarfs’ Dot-Com Bust

Friday, Feb. 1, 2008 10:48 a.m. EST

Think the subprime mortgage problem is just another version of the dot-com crash, or maybe an echo of the S&L crisis of old?
Think again, says Morgan Stanley Chairman Stephen Roach.

Speaking in Davos, Switzerland, Roach told investors that this time it really is different. Echoing similar comments by global financier George Soros and his former partner Jim Rogers, Roach said that the coming downturn will be severe.

Why? Because the portion of the economy linked to this collapse is six times larger than IT spending was at the time of the dot-com bust, according to reporting on the comments in the Financial Times.

This recession will be more than a year long and three times deeper than the last one, he warned. "The magnitude dwarfs anything we saw seven years ago," Roach said.
The problem has been easy money, Roach explained. Our national addiction to credit is simply on a different scale and its eventual cost will be higher than ever before.

Britain is in the same fix, Roach said, and there is little governments will be able to do to offset the coming pain for families and consumers.

"If we had been running our economies the old-fashioned way, for example, where saving and consumption were funded by income, maybe we wouldn't be in this mess we are in now,â€