- Nouriel Roubini says the economy is headed for a crash.
- The “Dr. Doom” economist says interest rate hikes and a mountain of debt will lead the US into a recession.
- In an interview with Bloomberg, Roubini broke down the “trilemma” markets are facing right now.
Thanks for signing up!
Access your favorite topics in a personalized feed while you’re on the go.
The Federal Reserve’s monetary tightening campaign is taking a serious toll on the US economy, famed market commentator Nouriel Roubini says, predicting that markets are heading towards a financial crash.
The central bank’s efforts in the name of fighting inflation are an economic “megathreat,” Roubini told Bloomberg TV on Friday.
“When interest rates go higher, the value of securities and loans is lower, and then we have mass liquidity and solvency problems,” the economist said.
This is much worse than other periods of monetary tightening and hikes in borrowing costs, he added.
While past decades have seen rates soar significantly higher than their current level of around 5% for the federal funds rate—which in the 1980s was around 20% and sparked a steep recession—this cycle is much more difficult for markets to stomach, as public and private debt levels have ballooned.
“So, we have the worst of the [1980s] in terms of negative supply shock, reduce growth that cause inflation,” Roubini said.
He added: “Now, we’re entering a recession and financial instability. [We’re] having to raise interest rates because inflation is too high. We get inconsistency in a trilemma. We cannot achieve price stability, maintain economic growth, have financial stability at the same time. So eventually…economic and financial crash.”
The famed economist has long been a doomsayer of the market. He’s predicted massive declines in stocks and economic crises sparked by recent upheavals like COVID-19. Roubini was also among the commentators who predicted the collapse of the housing bubble and the subsequent 2008 financial crisis.
His current outlook has called for a combination of 2008 and a 1970s-style stagflationary event to throttle the US economy.
