Sheldon Filger-blogger for GlobalEconomicCrisis.com
He predicted the 2007-09 Global Financial Crisis with uncanny accuracy, even while experts including then Federal Reserve chairman Ben Bernanke were dismissive of him. He’s Nouriel Roubini, economics professor at NYU and a highly distinguished economist. Though his correct forecast of the 2007-09 financial implosion earned him the nickname of Dr. Doom, he prefers to think of himself as Dr. Realist. His latest exercise in realism makes chilling reading.
As the Covid pandemic erupted, Roubini was already warning that the world faced a global economic depression sometime during the course of the present decade. With unprecedented sovereign debt expansion during the past year unleashed by governments under the guise of providing Covid relief, Professor Roubini has taken a fresh look at the data, and published his conclusions in a recent article that appeared in The Guardian.
“Conditions are ripe for repeat of 1970s stagflation and 2008 debt crisis,” reads the headline of Roubini’s article. “Warning signs are there for global economy, and central banks will be left in impossible position,” he writes.
In essence, Roubini points out that current trends, which include not only the massive expansion of sovereign debt but also contributing factors such as the loss of independence by central banks coupled with the decoupling between the United States and China, leading to fragmentation of global supply chains, point to an unavoidable train wreck for the global economy. It is a hellish forecast, which unfortunately has the ring of truth. If Professor Roubini’s forecast is as accurate as was his previous warning of the impending Global Financial Crisis of 2007-09, the world stands on the verge of the Global Economic Crisis of the 21st century, a Great Depression 2.0 coupled with high inflation. And, as Roubini warns, central banks will be powerless to stop it.
Perhaps the most insightful economist to watch as the Global Economic Crisis unleashed by the Covid-19 pandemic rages is Nouriel Roubini, economics professor at New York University. In the months leading up to the 2008 global financial crisis , his predictions were eerily accurate. Now he has published an essay on what is unfolding regarding the Coronavirus pandemic induced economic disaster on the Project Syndicate website, entitled ominously “A Greater Depression?”
I urge ever sensible person to read it; the link is: https://www.project-syndicate.org/commentary/coronavirus-greater-great-depression-by-nouriel-roubini-2020-03?
Among the points Professor Roubini makes is that the collapse in stock markets has greatly exceed in velocity not only what occurred during the global financial crisis of 2008, but also during the Great Depression during the 1930s. While other prognosticators are predicting a U or L or worst case V trajectory and recovery, Roubini views such happy talk as delusional. He sees every indicator as pointing to a global economy in unrestrained free fall. The hope for an eventual recovery lies in a host of unconventional monetary and fiscal measures. However, as he observes, there are a host of probable white swan events and negative political realities that will likely obstruct the unprecedented policymaking the now full-fledged Global Economic Crisis requires.
He was dubbed “Dr. Doom” for his uncanny and highly accurate prediction of the 2008 global financial crisis and global recession. Now, Roubini is again making dire predictions of a catastrophic global economic recession. This time, however, the decisive driver of the meltdown won’t be subprime mortgages but rather the increasingly tense relationship between the two largest economies in the world – America and China.
In an article for Project Syndicate entitled, ” The Coming Sino-American Bust Up,” the noted economist writes, “Whether or not US President Donald Trump and his Chinese counterpart, Xi Jinping, agree to another truce at the upcoming G20 summit in Osaka, the Sino-American conflict has already entered a dangerous new phase. Though a negotiated settlement or a managed continuation of the status quo are possible, a sharp escalation is now the most likely scenario.“
Roubini sees a global recession occurring as soon as 2020, a predictions that other economists have also prognosticated on. With the previous global economic crisis of 2008 having consumed all the policy perceptions that central banks and sovereign fiscal stimulus had available for decision makers, the coming global economic recession will find policy makers with few silver billets remaining. In the meantime, nationalism may replace rational economics in determining the course of the next recession, which Nouriel Roubini believes will be largely determined by the increasingly strife-ridden relationship between the United States and China.
Sheldon Filger-blogger for GlobalEconomicCrisis.com
Nouriel Roubini is known as “Dr. Doom” for his earlier predictions that a housing bubble in the United States would lead to disaster for the international financial and banking system. Roubini, Professor of Economics at the Stern School of Business, New York University and also Chairman of RGE Monitor, an economic and financial consultancy, was proven correct. Now he is considered the wisest sage on the future course of the Global Economic Crisis. His latest prediction will not lighten the hearts of investors.
In a recent article, Roubini stated that “the worst is still ahead of us. In the next few months, the macroeconomic news and earnings/profits reports from around the world will be much worse than expected, putting further downward pressure on prices of risky assets, because equity analysts are still deluding themselves that the economic contraction will be mild and short.”
Nouriel Roubini adds that the credit crisis will grow worse, pointing to a grim year ahead for global financial markets. He suggests in his article that “2009 will be a painful year of global recession and further financial stresses, losses, and bankruptcies. Only aggressive, coordinated, and effective policy actions by advanced and emerging-market countries can ensure that the global economy recovers in 2010, rather than entering a more protracted period of economic stagnation.”
While Roubini has thus far avoided using the term “Great Depression” to describe what he thinks may happen, it is clear that the world’s top economist on forecasting the Global Economic Crisis sees no grounds for optimism. His sobering assessment of what lies ahead for 2009 makes clear that a catastrophic year ahead awaits the global economy. He warns that the severe deflation now threatening will nullify monetary policy as a means of addressing the economic crisis, further enhancing the grave danger of a liquidity trap.
