Odd Lots Nouriel Roubini Predicts a Crisis 'Worse' Than the 1970s
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Oct 19, 2022 
Nouriel Roubini, a renowned economist and author of "MegaThreats," discusses the grim economic outlook. He predicts a downturn worse than the 1970s due to ongoing supply shocks and high private sector debt. Central banks, he warns, will struggle to combat rising inflation as financial markets face mounting pressure. The conversation also touches on the need for digital transformation during these challenging times and highlights the urgent risks of a stagflationary debt crisis for both the U.S. and global economies.
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Early Inflation Prediction
- Nouriel Roubini correctly predicted inflation in 2020 by considering both excessive stimulus and supply shocks.
- Others focused on deflation and missed the supply chain disruptions and labor shortages.
Inflation Drivers
- Current inflation is equally driven by supply shocks (e.g., war, China's policies) and excessive stimulus.
- Roubini identifies 11 medium-term negative supply shocks that will worsen stagflation.
Policy Response to Stagflation
- Central banks must tighten monetary policy despite supply-driven inflation to manage expectations.
- However, high debt levels will make this difficult, leading to a worse situation than the 1970s.
