Inflation and recession will be the constant companions of the global economy for years to come, according to Nouriel Roubini
The period of relative calm in the global economy is over and what lies ahead is an era of stagflation, that is, a period of slow growth coinciding with rising unemployment and rising inflation, a renowned economist and New York University professor Nouriel Roubini said Friday.
According to Roubini, who was among the first to predict the 2008 financial crisis, the current situation could be even worse given the multitude of risks and “mega-threatsthat the world is facing.
“In the short term, there is [risks] related to the war in Ukraine, of course, to inflation and to the specter of a financial crisis that could arise in the next few months or in the next two or three years. Added to this are the mega-threats likely to materialize more or less severely in the long term… starting with climate change… geopolitical tensions that could degenerate into nuclear war between great powers, and socio-political instability,“, he said in an interview with the French newspaper Le Monde.
Roubini, dubbed “Doctor Doom” by Wall Street, argued that the general consensus that inflationary pressures are temporary and that rising rates will temper soaring prices and ensure a “soft landing” of the economy is wrong.
“I think the landing will not be soft but hard, and associated with financial stress. Raising interest rates as the economy falters, with overall debt levels much higher than in the 1970s, could cause stock and bond markets to crash, potentially deepening the recession,” he stated.
According to the economist,part of the solution necessarily involves inflation, which reduces the debt burden.
“I’m not saying inflation is desirable, but I don’t see how to avoid it. The era of the great moderation is over, we are entering the great stagflation.
Roubini also warned of a potential trade war between Westerners”and a group of revisionist powers“, namely Russia, China, Iran and North Korea, “which could lead to a fragmentation of globalization and a relocation of production chains, increasing global insecurity.”
The economist urged the global community to learn from history and mobilize forces to prevent a further escalation of the crisis.
“We have lived like zombies who go back to sleep despite waking up and who have forgotten that history is not linear… The creation of major international institutions has allowed us to reconnect with a period of relative peace and prosperity. But believing that such an era could last is a mistake… The main stages of grief are denial, anger, depression and acceptance. If we look our problems squarely in the face, we can wake up and start to mobilize, but we’re still stuck somewhere between denial and anger.”
For more stories on economics and finance, visit RT’s business section
You can share this story on social media: