Nouriel Roubini, an economist called “Dr.” In a recent interview with Bloomberg about his pessimistic but accurate forecast of the 2008 market meltdown, he said the US was once again in the realm of the Great Financial Crisis.
Roubini, CEO of Roubini Macro Associates and author of MegaThreats, said: Appeared on October 25 In the “Bloomberg Watch” program, I was asked if I was “there again” in relation to the 2008 financial crisis.
“Yes, here we are again,” replied Roubini. “But in addition to the economic, financial and financial risks, there are also new risks, heading toward stagflation unlike anything we have seen since the 1970s.”
Stagflation, a combination of low growth and high inflation, was a hallmark of the economic crisis of the 1970s. At the time, oil prices were skyrocketing and inflation was nearly double what he is today.Soaring oil prices, rising unemployment, accommodative monetary policy pushed up the consumer price index Up to an annual rate of 14.6% in March 1980, urge the Fed Raise interest rates to nearly 20% that year to ease price pressures.
Roubini said that in addition to the economic, financial and financial risks currently occurring, the world faces higher geopolitical risks.
“We are China, Russia, Iran, or [North] South Korea challenging the geopolitical order of the United States and the West. And that would potentially lead to conflict,” he said.
He also spoke of the backlash against globalization, political turmoil and “very serious” environmental risks.
“There are technological risks arising from AI, machine learning, robotics, automation and job destruction,” he continued.
Moreover, Roubini said debt levels are at an all-time high, adding that they all represent a confluence of “megatrends,” which he believes will combine to create stagflation. He added that he predicted it would turn into a storm and engulf many of the world’s economies.
Private and public debt levels have exploded globally from 200% of GDP in 2000 to about 350% of GDP today, he said, making borrowing cheaper and enabling households, businesses and countries to He denounced ultra-accommodative central bank policies that encouraged ever-greater burdens. Loads of debt even though many were barely solvent.
But now, with the Federal Reserve-led central bank facing persistently high inflation embarking on an aggressive rate-hiking cycle, Roubini is left heavily indebted and operationally vulnerable. I predict that “zombie” institutions will go bankrupt.
“So there will be inflation and stagflation, but also a stagflationary debt crisis,” Roubini predicted.
Debt levels in the 1970s were much lower than they are today, so when the Fed raised interest rates to about 20%, advanced economies were spared a debt crisis.
“Today is the worst of the 1970s with a lot of negative supply shocks from stagflation,” he added.
Roubini said there are about 40 heavily indebted countries on the brink of a deep debt crisis.
Economists said the worst would happen if all 11 “megatrends” materialized, interacting with each other and leading to a “dystopian future”.
“It’s not just the end of the global economy…it could even be a global war.”
A long and severe US recession?
Despite worsening economic data and rising expectations of a recession, members of the Biden administration do not believe the U.S. will enter a recession, and even if it does, it will be short and shallow. says it will be
Roubini calls the forecast of a short-term mild US recession “delusional.”
he told Bloomberg In an interview at the end of July, he said he expected the United States to suffer “a deep recession and a deep debt and financial crisis.”
In an Aug. 15 interview, Roubini asked whether he continued to believe that forecasting a short, shallow recession by analysts was “delusional,” or whether he thought it would be long and tough. was given.
“Yes, that’s my view,” he confirmed, adding that the sheer amount of public and private debt swirling in today’s economy, where central banks are tightening to keep inflation in check, means defaults will skyrocket. and added.
“So when you get into a recession, you end up with zombie companies, zombie financial institutions, zombie households, zombie nations, governments.” As financial conditions tighten, debt service costs rise.
The U.S. economy has contracted for two straight quarters this year, meeting the unofficial definition of a recession, but the official mediator of the U.S. recession at the National Bureau of Economic Research has yet to declare it so.
Estimates of the latest GDP data released Thursday showed the U.S. economy expanded at an annualized pace of 2.6%, but returned to negative territory as signs of economic weakness increased. It has been suggested that there is a high probability of falling into