'Dr. Doom' economist Nouriel Roubini says we'll have inflation for a long, long time. He blame wars, the robot revolution, and 3 other disasters that will plague the global economy.
Inflation is sticking around, and you can blame war, robots, and rampant disease for that, according to "Dr. Doom" economist Nouriel Roubini.
"Dr. Doom" Nouriel Roubini warned that we'll have inflation for a long, long time – and you can blame, wars, the robot revolution, and slew of other disasters that will plague the global economy.
"Inflation rose sharply throughout 2022 across both advanced economies and emerging markets. Structural trends suggest that the problem will be secular rather than transitory," the top economist said in a recent op-ed for Project Syndicate.
That comes after a difficult year for the US economy, with prices hitting a 41-year-high in 2022 and still hovering well-above the Fed's 2% target. According to Roubini, central bankers around the world are unlikely to bring down inflation without causing a severe recession, which could spell trouble for the global financial system considering that many households, banks, and governments are heavily indebted.
Michael Burry, Jeremy Grantham, and other market experts have warned the stock-market downturn this year is far from over.
Nouriel Roubini, Robert Kiyosaki, and Harry Dent are among those predicting asset prices will plunge further. They have cited excessive valuations, stubborn inflation, a potential recession, pandemic disruptions, and food and fuel crises as some of the reasons they expect a devastating crash.
Michael Burry diagnosed last year an unprecedented bubble in asset prices, and warned it would culminate in the "mother of all crashes." He hinted the meltdown is in full swing in a since-deleted tweet this week.
The investor of "The Big Short" fame shared a S&P 500 chart showing the stock-market index has plunged 18% from its December peak. "And yet I keep getting asked 'wen crash?'" he wrote, implying the downturn is well underway.
Burry has suggested the S&P 500 could plummet by 53% to below 1,900 points over the next few years, based on the benchmark index's bottom tick during previous crashes.
Jeremy Grantham cautioned an epic "superbubble" across stocks, bonds, and housing was about to collapse, writing in a research note this week.
The veteran investor and GMO cofounder dismissed the recent rebound in stocks as a brief reprieve, noting that previous superbubbles have always been followed by market declines of at least 50%.
Grantham outlined how a painful combination of pressures spell trouble for asset prices and global growth. He pointed to shrinking corporate margins, high inflation, interest-rate hikes, food and energy crises, pandemic disruptions, the Russia-Ukraine war, and longer-term issues such as ageing populations and labor shortages.
"Each cycle is different and unique — but every historical parallel suggests that the worst is yet to come," he said.
Nouriel Roubini suggested during a recent webinar that the Federal Reserve might have to raise interest rates to 5% to rein in inflation. But he said a hike of that magnitude in the debt-ridden US economy could cause stocks, bonds, housing, credit, private equity, and other markets to crash.
The NYU Stern economist, whose nickname is "Dr. Doom," argued the economy was poised to suffer a painful recession, which could drive stocks down by another 35%.
Roubini noted that stubborn inflation would likely weigh on stocks and bonds. He advised investors to hedge their portfolios with alternative assets such as gold, real estate, or bitcoin.
Similar to Burry, Robert Kiyosaki sounded the alarm on the "biggest bubble in world history" last summer, and said it would end with an equally historic meltdown.
"THAT CRASH IS HERE," he tweeted this week. "Millions will be wiped out."
The "Rich Dad Poor Dad" author and personal-finance guru noted in another tweet that stocks, gold, silver, bitcoin, and real estate were all crashing. He said he expected the downturn to continue in the coming months.
However, Kiyosaki reassured investors that selloffs provide opportunities to scoop up bargains and ultimately get rich. He recalled borrowing millions of dollars to purchase cut-price real estate during the financial crisis.
Harry Dent, a market historian and newsletter writer, warned investors that the recent bounce in stock prices would be followed by an even bigger decline.
"We had this first crash, a tepid bounce, and now we'll have another one of the same magnitude," the market historian and newsletter writer said in a recent radio interview.
Notably, Dent touted the expected downturn as a chance for young people to invest at reasonable prices, generate robust returns, and save for retirement. He recommended investing in multifamily real estate and long-dated Treasury bonds before asset prices crash.
Central bankers can't cushion a debt crisis without slashing interest rates, which could worsen inflation. That impasse could slam the global economy with "the mother of all stagflationary debt crises," Roubini warned, a financial disaster that entails high unemployment, high inflation, and in the US, a steep stock market crash.
Roubini, who called the 2008 recession and is known for his doomsayer predictions on Wall Street, has said that sort of inflationary-debt disaster is inevitable at this point. It could also stretch on for years, he warned, pointing to five major problems in the global economy that could jack up prices and government spending, exacerbating the incoming crash.
Russia's invasion of Ukraine disrupted supply chains and has already rattled the global economy, but geopolitical conflict could spread across the world, Roubini said. He pointed to tensions between the US and other major powers, such as the Middle East, Iran, and China, and previously warned that World War III has already begun.
Tensions are leading many powers to build up their shore of military supplies, including NATO, Europe, and the US. That burden on national budgets could exacerbate high-debt levels and inflation, prolonging the financial crisis he's warned of.
The global economy is also waging a war against climate change, which could be expensive to resolve.
"Climate-change mitigation and adaption could cost trillions of dollars per year for decades to come, and it is silly to think that all these investments will boost growth," Roubini said, adding that nations would likely become poorer over time.
"A significant share of the existing capital stock will have to be replaced, either because it has become obsolete or because it has been destroyed by climate-driven events."
The spread of COVID-19 isn't over, and neither are pandemics. Roubini predicted disease outbreaks would become rampant in the future, partly due to the effects of climate change. That could significantly rack up government debt as leaders attempt to tackle one public health crisis after the other, while also confronting the costs of welfare for an aging society.
The global economy will be slammed by "globotics," as Roubini calls it, or the innovation stemming from globalization and automation. While some argue those factors are spurring economic growth, they're a major threat to blue- and white-collar workers, meaning governments could be forced to shell out huge sums of cash if robots, AI technology, and other advancements put people out of work.
The costs could be hefty, Roubini warned. He estimated that the US could lose about 20% of its GDP if the government doles out a basic income of $1000 per person a month.
Wealth gaps are sparking unrest among the young and the middle- and working-classes, Roubini said, which could be expensive for government leaders to smooth over.
"To prevent populist regimes from coming to power and pursuing reckless, unsustainable economic policies, liberal democracies will need to spend a fortune to reinforce their social safety nets – as many are already doing," he said.
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