I've been watching Roubini on CNBC for the last couple of months.
When the DIJA was approaching 10,000 and everyone thought the worst was over he was on CNBC saying that just like he predicted, the recession would last 2 years (Q4 2009) and was about to recover. Then he went on to say that there was a real possibility of having a "W" type recession on the same interview. Now he's been quoted as saying that a carry trade can easily lead to a world-wide crash. And I'm certain he's made many other contradicting predictions too.
Who cares. The man is a fool and is forecasting nothing. He's left little room for error since he's put forthe all scenarios.
In regards to the value of the US dollar/stock market direction corellation - there's plenty of data out there to disprove any such connection. There have been many times when the dollar goes up as the stock market goes up or down when the stock market goes down or up when the other is down. There are all kinds of public dollar value charts measured against the stock market in the last 10 years to illustrate that there is often no connection or loose connections at best. The same logic was used for oil and that it was somehow connected to the stock market. But haven't we seen it all recently? Wasn't it going up with stock valuations for years? Then as the stock market began to crash hard, oil went to record highs? So much for that connection....
I do believe that when people stop spending again, that deflation will run rampant. But I hardly see this thing as being a governement lead initiative (recent run up in stocks). The stock market downturn will continue when it does, irrespective of anything the governement does or has tried to do (as it did last year and earlier this year).
Lets not forget that the government was injecting all kinds of dollars (bailouts or other) as the stock market continued to crash and go lower last and earlier this year and it did nothing to stop the DIJA from going all the way down to 6500. And yes, the bailouts and the rest of those programs happened well before those lows.
Perhaps the stock market isn't controlled or influenced by governements and it's bailouts.... and it'll continue it's direction when it is ready to do so, as it always has, by the one over-riding force that everyone always forgets to consider (the human element or rather, the culmination of it).