REUTERS/Gus Ruelas
- Nouriel Roubini fears the global economy could suffer both depressed growth and rising prices.
- The "Dr. Doom" economist warned that stimulus, debt, and supply crunches could spark stagflation.
- Roubini sounded the alarm on meme stocks, crypto, SPACs, and the retail-trading boom.
- See more stories on Insider's business page.
The global economy could suffer a brutal one-two punch of stagnant growth and surging prices, Nouriel Roubini warned in The Guardian this week.
The economics professor at NYU Stern, whose nickname is "Dr. Doom," thanks to his penchant for dire predictions, warned that central banks and governments are "setting the stage for the mother of stagflationary debt crises over the next few years."
The Federal Reserve and Treasury, along with their equivalents around the world, have relied on ultra-loose fiscal and monetary policies to drive economic growth over the past decade. They doubled down on that approach during the pandemic, spending trillions of dollars on stimulus checks and bond purchases, and keeping interest rates near zero. Those efforts have further inflated the prices of stocks, houses, and other assets, and also encouraged aggressive borrowing, Roubini said.
The economist pointed to the hype around cryptocurrencies, meme stocks, special-purpose acquisition companies (SPACs), and retail trading as proof of "irrational exuberance." He expects immense demand to fuel inflation, and supply pressures such as protectionism, the break-up of global supply chains, and cyberattacks on key infrastructure to push up prices too.
Moreover, governments have borrowed vast amounts of money to finance their stimulus plans, and are far more indebted now than they were 50 years ago, Roubini said. They might struggle to service their debts as well as bail out banks, companies, and households if markets crash and the global economy slides into recession, he cautioned.
Central banks are in a bind as a result, according to Roubini. They risk sparking a wave of defaults and crippling economic growth if they taper their stimulus efforts, and fueling double-digit inflation if they keep going, Roubini said. "Damned if they do and damned if they don't," he continued.
"This slow-motion trainwreck looks unavoidable," Roubini added. "The stagflation of the 1970s will soon meet the debt crises of the post-2008 period. The question is not if but when."