Global Financial Apocalypse-Nouriel Roubini
2022.12.07 06:12
Global Financial Apocalypse-Nouriel Roubini
Budrigannews.com – The well-known economist Nouriel Roubini, who is now professor emeritus of economics at the Stern School of Business at New York University, is well-known for his pessimistic predictions about the state of the global economy and financial markets. The opinion piece in Project Syndicate, on the other hand, went even further and was titled “The Unavoidable Crash,” referring to the unavoidable collapse that the globalized world will experience in a few months and to which not even central banks will be able to respond.
“The mother of all economic crises looms, and there will be little that policymakers can do about it,” the economist writes. “After years of ultra-loose fiscal, monetary, and credit policies and the onset of major negative supply shocks, stagflationary pressures are now putting the squeeze on a massive mountain of public- and private-sector debt.”
Roubini draws attention to “staggering” data on debt to support his argument. “Total private- and public-sector debt as a share of GDP rose from 200 percent in 1999 to 350 percent in 2021,” he writes. Currently, the ratio is 425 percent in advanced economies and 335 percent in China. It is 425 percent in the United States, which is higher than it was during the Great Depression and following World War II.”
Low rates have kept “insolvent zombies” like “households, corporations, banks, shadow banks, governments, and even entire countries” up during the 2008 crisis and the COVID biennium, as the article explains. This over-borrowing has been going on for a long time.
However, according to Roubini, inflation has ended “this financial Dawn of the Dead” as a result of the same ultra-loose fiscal, monetary, and credit policies, and as a result of central banks being forced to raise interest rates, “zombies are experiencing sharp increases in their debt-servicing costs.”
This extreme change addresses “a triple whammy,” as expansion is likewise disintegrating families’ genuine pay and diminishing the worth of their resources, like land and monetary resources. ” The same is true for governments, financial institutions, and fragile and over-leveraged corporations: They are simultaneously confronted with sharply rising borrowing costs, declining incomes and revenues, and declining asset values.”
Extremely loose policies can no longer be implemented because they would exacerbate inflation, which would result in a severe financial crisis in addition to a prolonged deep recession, as the economist points out.
According to the article, “the economic crisis, and the financial crash will feed on each other as asset bubbles burst, debt-servicing ratios spike, and inflation-adjusted incomes fall across households, corporations, and governments will feed on each other.”
“Advanced economies that borrow in their own currency can use a bout of unanticipated inflation to reduce the real value of some nominal long-term fixed-rate debt,” writes Roubini. “To be sure.” Yet again with legislatures reluctant to increase government rates or slice spending to diminish their shortages, national bank shortfall adaptation will be viewed as the easiest course of action. However, it is impossible to fool everyone all the time.
