- The global economy is headed into a stagflation era, top economist Nouriel Roubini said.
- "The world economy is undergoing a radical regime shift," he wrote Tuesday, declaring the end of the Great Moderation.
- Roubini warned central banks may find themselves in a "debt-trap" as they try to normalize monetary policies.
The global economy is headed into a stagflation era and central bankers may be trapping themselves by trying to normalize monetary policy, top economist Nouriel Roubini said.
"The world economy is undergoing a radical regime shift," he said in an op-ed for Project Syndicate on Tuesday, declaring the end of the Great Moderation, during which economies enjoyed low inflation, high growth, and mild recessions.
Those qualities have been the standard for the past few decades, but are reversing into what Roubini dubs as the Great Stagflation: an era of high inflation, low growth, high debt, and the potential for severe recessions.
Global economies carry larger debt ratios than before, setting up central banks for potential failure, Roubini said.
"Central banks are thus locked in a 'debt trap': any attempt to normalize monetary policy will cause debt-servicing burdens to spike, leading to massive insolvencies, cascading financial crises, and fallout in the real economy," he said.
Roubini has earned the nickname "Dr. Doom" for his frequent warnings of economic catastrophe, including his call on the 2008 financial crisis.
In recent op-eds, he's added that stocks could plunge as much as 50% and predictions of a mild recession were simply "delusional."
For the new economic era, his message for investors is similarly bleak:
"During the Great Stagflation, both components of any traditional asset portfolio — long-term bonds and US and global equities — will suffer, potentially incurring massive losses," Roubini said Tuesday.