DEFCONOMY

There isn't a damn thing about Glenn Beck that I agree with. Until now. Here's his "Defconomy" (think DefCon) scale that he wrote way back in February with the help of a few economists. We're obviously at DEFCON3.

• DEFCONOMY FIVE

How you'll know we're here: The housing downturn turns into a free fall, making it the worst collapse in our country's history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.

Odds we get here: Roubini told me that it's "extremely likely, even unavoidable" that we hit this stage because "the excess supply of new homes in the market is like we've never seen before." Prices, he believes, "need to fall another 10 to 20 percent before that clears."

• DEFCONOMY FOUR

How you'll know we're here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.

Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.

• DEFCONOMY THREE

How you'll know we're here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.

Odds we get here: Very good. Roubini says that we'll likely socialize the losses, "effectively nationalizing the mortgages or the banks." It would be, he told me, "like Northern Rock (the large bank in England that was recently taken over by the British government) times three." He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.

• DEFCONOMY TWO

How you'll know we're here: Most forms of credit (both to consumers and businesses) become virtually nonexistent. That results in a "vicious circle" of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.

Odds we get here: Good. Roubini says that credit conditions are becoming worse everyday across a variety of markets and won't be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.

• DEFCONOMY ONE

How you'll know we're here: Welcome back to 1929. A full economic meltdown results in a complete failure of the underlying financial system. What will be known to future generations as "The Greater Depression" has arrived.

Odds we get here: Not likely. Roubini believes that this will be a "very painful and severe recession" that could last for 18 months or more, but it will be more like 1981 than 1929. Families may be eating soup again, but at least it'll be in their own kitchens.