Economic Issues

Economist Says the “Perfect Storm” Is Brewing

Economist Says the “Perfect Storm” Is Brewing

ussanews.comMar 9, 2023 1:08 AM

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President Joe Biden boasted about his administration’s so-called success in rebuilding the nation’s economy and recent job gains during his February State of the Union Address. However, not everyone is convinced his ongoing effort to create an economic structure “from the bottom up and the middle out” will succeed. For instance, a leading economist and former New York University professor recently predicted that a “perfect storm” is brewing.×300&!2&fsb=1&xpc=28ay3jed4m&p=https%3A//

On March 2, Nouriel Roubini sat down for a wide-ranging interview with Australian Broadcasting Corporation host Alicia Barry to discuss America’s economic outlook for 2023. According to him, a “perfect storm” involving rising inflation, indebtedness, and recession could result in a significant global “stagflationary debt crisis.”

Roubini explained the latest data emerging from the US, Europe, and other advanced economies shows “sticky” spiraling inflation — and it won’t go away anytime soon. That creates a situation wherein the world’s central banks must continue raising interest rates to offset rising prices. But, that process could create an economic contraction.

Additionally, central banks have to react quickly to avoid a “de-anchoring of inflation and… expectation.” In other words, Roubini predicted a recession would strike the US, Europe, and other developed countries later this year.

All the signs are there, according to Roubini, including:

  • Increased job loss and high unemployment
  • Labor market weakness
  • An inflation rate surpassing wage growth

The problem spans “across the board” since prices are rising faster than wages, leading to more lost wages and increased stagflation or lingering inflationary trends.

Turning his attention to America, Roubini says the Fed needs to boost interest rates to over 6% to reach a target level of 2% inflation to avoid a recession. However, such a move will create a “crash in financial markets” followed by a “severe correction of equity markets,” leading to a massive wave of debt defaults.

Predicting economic trends is tricky due to the enormity of unforeseen factors contributing to inflation and marketplace instability. Still, according to The Epoch Times, Roubini was one of the first economists to predict the 2008 recession.

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