Tuesday, 04 April 2023, 03:45
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Teacher Nouriel Roubiniof New York University, the famous economist who predicted the Great Crash of 2008, is now warning that international markets should prepare for the crisis as stressors lead to a “fatal loop” in the world economy.
This is due to three stress factors in the economy, which will leave the Fed (Central Bank a YOUR) unable to fight the recession, accordingly Business Insider.
Roubini, 65, who predicted the 2008 recession, has long warned of impending financial chaos. Nouriel Roubini has more dire words of warning for the economy.
“Dr. Doom” warned in an analysis this week that the US is facing a major financial crisis and the economy is entering what he calls “a fatal loop”.
In an op-ed for Project Syndicate, Roubini predicted a future cycle of economic crisis as the US grapples with both high inflation and a high debt burden. These problems perpetuate each other, he said, warning of an impending recession and financial crisis that would only get worse the longer it went on.
“A severe recession is the only thing that can temper price and wage inflation, but it will make the debt crisis more severe and, in turn, fuel an even deeper economic recession,” the American economist argued.
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In his analysis, Nouriel Roubini insists that “most US banks are technically close to insolvent, and hundreds are already completely insolvent. Liquidity support cannot prevent this systemic crash loop,” according to Bitcoin News.
Roubini points out how banks in America incurs unrealized losses on securities worth $620 billion. Moreover, Roubini mentioned the US Federal Reserve’s interest rate hike and said, “To make matters worse, higher interest rates have also reduced the market value of banks’ other assets.”
“A severe recession is the only thing that can temper price and wage inflation, but it will make the debt crisis more severe and in turn fuel an even deeper economic recession,” he said. “Since liquidity support cannot prevent this systemic loop, everyone should prepare for the coming stagflationary debt crisis.”
The renowned economist, who is known for his doomsday forecasts, has warned for months of a stagflationary debt crisis that will involve a steep recession that combines the worst aspects of the stagflation of the 1970s and the financial crisis of 2008. He expects such a scenario would hit the economy with high inflation, low growth and a 30% stock market crash.
This disaster comes largely as a result of three economic stressors facing the US: high inflation, high debt levels, and financial instability. The result is a “trilemma” that leaves the Fed at an impasse, Roubini said.
He predicted that Fed officials would eventually “get away” from raising interest rates, and this would cause runaway inflation, debt problems and financial instability throughout the economy. Dr. Doom says that “Everyone should prepare for the coming stagflationary debt crisis.”
Roubini points out that the world’s central banks “face not just a dilemma, but a trilemma.” In addition, regional banks, which are vital for financing small and medium-sized enterprises and households, are particularly affected.
