Well, he is giving a particular possible scenario, there are others. IMO, the business cycle is taking a long time to come back around this time due to huge debt loads at just about every level of the economy, but over time that will just fix itself as debts are paid down and people in general become less and less likely to use credit. Sooner or later a new technological advancement, an invention, population increases, or a good old fashion war will cause demand to rise again, and that is the real problem in the world economy. We have a demand problem, not a debt problem. Once demand kicks in, you will see debts become less and less of a problem at all levels of the economy.

The fundamental flaw I see in his argument is that he says Germany will not step in to help Italy, I think such a thing is highly unlikely, since it would be Germany, which depends on exports, cutting it's own throats. Eventually the government's will solve their debt problems the way they always do, by inflating their currencies. We will be reliving the '70s soon.

The problem with listening to doomsayers is that they have an inherent conflict of interest - these guys are making a lot of money pushing their books and subscriptions by peddling fear at a time that fear is selling well. They want everything to be a disaster, so everything is a disaster or the sign of some impending one.