Economist Nouriel Roubini, a professor at New York University and CEO of Roubini Macro Associates, known by the nickname Dr. Doom for predicting the real estate market crash in 2007 and 2008, has once again commented on current events in his style for the Financial Times, and of course, he has also provided his (gloomy) predictions for the near future.
– I think the world is really in slow-motion train wreck. There are major new threats that did not exist before, they are piling up, and we are doing very little about them – Dr. Doom begins his story.
Roubini is the economist who warned in August 2006 that there was a 70 percent chance of a recession in the U.S., mainly due to the decline in the real estate market. Initially, his predictions were dismissed, and he was even called derogatory names, but he remained steadfast, unwavering and negative, and ultimately correct.
Pessimism is widespread today, says Roubini, who has set his doom clock to eleven o’clock, which means one hour from catastrophe. In his book ‘Megathreats‘, Roubini outlined a series of negative risks, from inflation to artificial intelligence, climate change, and a third world war, which he believes will combine for ‘maximum effect’.
– We must learn to live at a high level of caution – he says, adding that we will need luck, global cooperation, and unprecedented economic growth to pull ourselves out of the current situation.
Conventional wisdom, which comes from policymakers or Wall Street, has been systematically wrong, he says. First, they said inflation would be transitory. Then there was a debate about whether rising inflation was due to bad policies or bad luck, i.e., supply shocks like the Russian invasion of Ukraine and China’s COVID restrictions. Roubini says the consensus that the recession will last six months is wrong, and he believes this will not be a short and shallow recession, but rather the opposite, it will be long and deep.
– The Fed, ECB, and Wall Street say we will have a soft landing. In the monetary history of the U.S. over the past 60 years, we have never had a period where inflation exceeded 5 percent, and today it is 7.1 percent. If you raise interest rates to fight inflation, you will not achieve a soft landing. It always ends up being a hard landing – Roubini states.
As for Europe, Dr. Doom says the situation is even worse because the UK is already in stagflation.
– Inflation is above 10 percent, and even the central bank of the UK (Bank of England) expects at least five quarters of negative economic growth. Let’s add that the Brits shot themselves in the foot with Brexit, so that is another stagflationary shock – says Dr. Doom.
