"Dr. Doom" At It Again: Predicts 10-Year Depression

That would be Nouriel Roubini of NYU who got his moniker back during the Great Recession, which he called pretty well in 2006. He did this clearly in an interview in The Intelligencer, although he has been pushing something like this for some time now, bringing in all sorts of things like climate change and more pandemics to reinforce this long-run forecast, although he thinks in a decade there may be a sufficient restructuring of the economy to improve the situation.  While he mostly does not talk about what should or could be done in the US, he seems to improve of a German type economy where the unemployment rate has risen only 1% in comparison to the massive increase towards 20% we have seen in the US. Of course, Germany has managed the coronavirus much better than has the US, but they also have their Kurtzarbeit labor system that tends to preserve employment better during downturns, not to mention a broader social safety net as part of its social market economy. He says things might have been better if we had Bernie Sanders as president, but then notes that compared to Merkel in Germany and even Boris Johnson in the UK, Sanders is a right-winger.

Roubini thinks that various policy stimuli put in place in the US will lead to a temporary period of growth, but that this will pan out fairly soon with growth turning negative, leading to something more like an L or U shaped pattern. The key will be massive defaulting on debts as the impact of massive unemployment works its way through via lots of non-payment on servicing those debts. He also argues that a factor in the longer-term depression will be a resurgence of inflation partly due to the negative supply-side aspects of the depression due to deglobalization and higher costs of new technology, exacerbated by an emerging US-China cold war that will have the US paying more for 5G systems. This will in turn lead to higher interest rates, and these will add to the tanking of the debt load, which he notes could not stand it when the Fed wanted to push the fed funds rate above 2.5% at end of 2018 when the economy was doing very well.

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