The world is facing a combination of 10 dangerous trends that could have severe implications for economic stability and geopolitical relations, including rising debt levels, the end of globalization, and the potential for stagflation.
Roubini warns about the 'mother of all debt crises' triggered by high global debt and rising interest rates, which could lead to severe recessions and financial distress worldwide.
Deep dives
The Rise of Mega Threats
In this podcast episode, Nouriel Roubini discusses the concept of mega threats to the global economy. He emphasizes that the world is facing a combination of 10 dangerous trends, including rising debt levels, the end of globalization, and the potential for stagflation. Roubini highlights that these threats are interconnected and can have severe implications for economic stability and geopolitical relations. He stresses the need for a holistic approach to understanding and addressing these threats, involving economics, politics, society, and technology. Roubini also explores potential solutions and the importance of collective action to navigate these challenges.
The Danger of Debt Accumulation
Roubini delves into the issue of rising debt levels as a major concern. He explains that global debt has significantly increased over the past few decades, reaching alarming levels relative to GDP. He warns that while low interest rates and monetary policies helped sustain highly indebted entities during periods of low inflation, the situation becomes precarious when inflation rises and interest rates need to be increased. Roubini labels such a scenario as the 'mother of all debt crises,' which could trigger severe recessions and financial distress worldwide.
The Decline of Globalization
Roubini discusses the phenomenon of de-globalization and the potential end of the era of hyper-globalization. He explains how geopolitical tensions and protectionist measures are leading to the rethinking and reshoring of supply chains. Roubini highlights the negative implications of this trend, including reduced efficiency, higher production costs, and the potential for trade and currency wars. He views de-globalization as a significant risk to global economic integration and warns of potential consequences such as stagflation.
The Threat of Stagflation
Roubini raises concerns about the emergence of stagflation in advanced economies. He points to high inflation rates, driven by a combination of loose monetary and fiscal policies during the COVID-19 pandemic, as well as negative supply shocks. He identifies 11 forces, including protectionism, aging populations, climate change, and geopolitical tensions, that could contribute to a prolonged period of stagflation. Roubini emphasizes the need for effective policy responses to address these challenges and prevent a prolonged downturn.
Co-host Michael Chui talks with Nouriel Roubini. Roubini is professor emeritus of economics at the Stern School of Business at New York University, and CEO of Roubini Macro Associates, a global macroeconomics consultancy. He covers topics including the following:
The “mother of all” debt crises and what to do about it
Likely future trends in the global balance sheet—the world’s economic health and wealth