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Home Economy

Nouriel Roubini predicts a decade of despair for the world economy

by Cody Lawson
May 6, 2020
4 min read
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Nouriel Roubini predicts world economy
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Nouriel Roubini once again lived up to his nickname “Dr. Doom.” As “Project Syndicate” reports, the economics professor believes that the Corona crisis will be followed by a decade of despair for the entire global economy.

Although Roubini does not want to exclude the possibility of a lackluster U-fridge recovery this year, he said that an L-fridge major depression would follow later in the decade. This is due to structural problems, some of which already existed before the financial crisis of 2007-2009 and which have been exacerbated by political mistakes since then.

Roubini names ten risky trends:

1. The first ominous trend is the growing indebtedness and the resulting risks. Governments have launched massive aid programs to cushion the economic consequences of the Corona crisis. Many countries are already struggling with an enormous mountain of debt.

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Worse still in the private sector, the loss of household and corporate revenues would push debt to unsustainable levels. Numerous insolvencies would threaten.

2. The demographic development in the industrial nations is also a cause for concern. The Corona crisis has shown that there is an urgent need to invest more money in the health sector. However, since most of the industrialized countries have aging societies, the additional expenditure required to achieve this would further aggravate the debt problem.

3. As a result of the current health hazards, many factories are shutting down, workers are being laid off, and the prices of raw materials such as metals and industrial metals are falling. Given this, the risk of Deflation a steady decline in the price level.

4. US economist Nouriel Roubini is also concerned about the threat of currency devaluation. For it is not only governments that are resorting to unprecedented measures to combat the economic effects of the current crisis. The international central banks are also intervening massively in the market and have opened their money-locks.

5. The Corona crisis also revealed the risks of a globalized economy when there were interruptions in supplies from regions affected by the epidemic. Roubini, therefore, expects that in the future, many companies will purchase fewer primary products from low-wage countries, but will instead rely more heavily on domestic suppliers. However, this will not benefit the employees but will accelerate the increasing automation, which in turn will put pressure on wages.

6. According to Nouriel Roubini, the corona crisis will also accelerate the trend towards fragmentation, which already existed. For example, the economies of the US and China would be decoupled even more rapidly. Besides, many governments would resort to protectionist measures to protect their companies and employees from global strictures. The economic expert expects stricter restrictions on the movement of goods, services, capital, labor, technology, data, and information in the post-Corona era.

7. Roubini also fears that the Corona crisis will fuel populist, nationalist, and xenophobic thinking. For in times of heightened economic uncertainty, foreigners are often blamed for disasters. In particular, calls for restrictions on migration and trade are more likely to be heard in such an environment.

8. The conflict between the USA and China is further exacerbated by Corona. The Trump administration is already trying to blame China for the outbreak of the pandemic. Beijing, on the other hand, sees this as merely an attempt by the USA to hinder China’s rise. Roubini believes that the Sino-American decoupling of trade, technology, investment, and data will, therefore, now take place even faster.

9. But the US economist goes even further, warning that diplomatic tensions could lead to a new Cold War between the US and its opponents China, Russia, Iran, and North Korea.

Since the US presidential elections are also scheduled for this year, it is obvious to fear an increase in cyberwar attacks, said Roubini. Perhaps this could even lead to conventional military conspiracies.

10. Finally, Nouriel Roubini points out that humans are partly responsible for epidemics and climate change. For the future, he fears that these problems will become more frequent and more intense and that the costs will rise.

Is there a happy ending?

These ten risks threaten to plunge the entire global economy into a decade of despair, warns market pessimist Roubini. Although many of these problems could be reduced by 2030 through better technology and political leadership, the first thing to do is to get through the impending Great Depression.

Tags: coronaviruscovid-19
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