{"id":39376,"date":"2023-01-02T19:38:20","date_gmt":"2023-01-02T19:38:20","guid":{"rendered":"http:\/\/www.brandon.ddtest.info\/multisite-test\/the-unavoidable-crash-by-nouriel-roubini\/"},"modified":"2023-01-02T19:38:20","modified_gmt":"2023-01-02T19:38:20","slug":"the-unavoidable-crash-by-nouriel-roubini","status":"publish","type":"post","link":"http:\/\/www.brandon.ddtest.info\/multisite-test\/the-unavoidable-crash-by-nouriel-roubini\/","title":{"rendered":"The Unavoidable Crash by Nouriel Roubini"},"content":{"rendered":"<p> \n<\/p>\n<div itemprop=\"description\" dir=\"ltr\">\n<p>After years of ultra-loose fiscal, monetary, and credit policies and the onset of major negative supply shocks, stagflationary pressures are now putting the squeeze on a massive mountain of public- and private-sector debt. The mother of all economic crises looms, and there will be little that policymakers can do about it.<\/p>\n<\/p><\/div>\n<div dir=\"ltr\" itemprop=\"articleBody\" data-page-area=\"article-body\">\n<p data-line-id=\"5b012998b42c42db878c3c336b55be14\"> NEW YORK \u2013 The world economy is lurching toward an unprecedented confluence of economic, financial, and debt crises, following the explosion of deficits, borrowing, and leverage in recent decades. <\/p>\n<aside class=\"inlay inlay--slide slide__container show-for-medium editorpick-container\" dir=\"ltr\" lang=\"en-us\" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ItemList\">&#13;<br \/>\n    <meta itemprop=\"itemListOrder\" content=\"Unordered\"\/>&#13;<\/p>\n<ol class=\"list\" id=\"editorspicks\">&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<\/p>\n<li class=\"slide\" id=\"editor-pick-63aec377a62ecdfa4d8f68d3\" aria-hidden=\"false\" itemprop=\"itemListElement\" itemscope=\"\" itemtype=\"https:\/\/schema.org\/ListItem\">&#13;<br \/>\n                    <meta itemprop=\"position\" content=\"1\"\/>&#13;<br \/>\n                    &#13;<\/p>\n<article class=\"listing asize asize--c listing--contained\" data-url=\"argentina-economy-world-cup-victory-lessons-by-mario-i-blejer-2022-12\" data-page-subarea=\"main-article-a2\">&#13;<br \/>\n    <a href=\"https:\/\/news.google.com\/commentary\/argentina-economy-world-cup-victory-lessons-by-mario-i-blejer-2022-12\" title=\"Lessons from Argentina\u2019s World Cup Victory\" itemprop=\"url\" tabindex=\"-1\" data-entity-type=\"document\" data-entity-id=\"63aec377a62ecdfa4d8f68d3\" data-language=\"english\" data-event-action=\"click\" data-entity-link-name=\"argentina-economy-world-cup-victory-lessons-by-mario-i-blejer-2022-12\" class=\"track-event overlay\" data-href-original=\"https:\/\/news.google.com\/commentary\/argentina-economy-world-cup-victory-lessons-by-mario-i-blejer-2022-12\"><span class=\"u-tos\">Lessons from Argentina\u2019s World Cup Victory<\/span><\/a>&#13;<br \/>\n&#13;<br \/>\n    &#13;<br \/>\n&#13;<\/p>\n<figure class=\"image image--ratio-c listing__image    \">&#13;<br \/>\n&#13;<br \/>\n       &#13;<br \/>\n&#13;\n    <picture>&#13;<br \/>\n&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/ab1ab6575122033c8c0bcee4981ee2c6.16-9-medium.1.jpg\" media=\"--xsmall\">&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/ab1ab6575122033c8c0bcee4981ee2c6.4-3-large.1.jpg\">&#13;<br \/>\n            <img src=\"https:\/\/webapi.project-syndicate.org\/library\/ab1ab6575122033c8c0bcee4981ee2c6.16-9-medium.1.jpg\" width=\"480\" height=\"270\" loading=\"lazy\" alt=\"blejer11_Julian FinneyGetty Images_argentinaworldcup\"\/>&#13;<br \/>\n&#13;<br \/>\n    <\/source><\/source><\/picture>&#13;<br \/>\n            <span class=\"image__copyright\">Julian Finney\/Getty Images<\/span>&#13;<br \/>\n    <\/figure>\n<p>&#13;<br \/>\n&#13;<br \/>\n        &#13;<br 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data-entity-link-name=\"ps-commentators-best-reads-2022-by-ps-editors-2022-12\" class=\"track-event overlay\" data-href-original=\"https:\/\/news.google.com\/onpoint\/ps-commentators-best-reads-2022-by-ps-editors-2022-12\"><span class=\"u-tos\">PS Commentators\u2019 Best Reads in 2022<\/span><\/a>&#13;<br \/>\n&#13;<br \/>\n    &#13;<br \/>\n&#13;<\/p>\n<figure class=\"image image--ratio-c listing__image    \">&#13;<br \/>\n&#13;<br \/>\n       &#13;<br \/>\n&#13;\n    <picture>&#13;<br \/>\n&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/a3307e8a1809363a42849184e721c5c4.16-9-medium.1.jpg\" media=\"--xsmall\">&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/a3307e8a1809363a42849184e721c5c4.4-3-large.1.jpg\">&#13;<br \/>\n            <img src=\"https:\/\/webapi.project-syndicate.org\/library\/a3307e8a1809363a42849184e721c5c4.16-9-medium.1.jpg\" width=\"480\" height=\"270\" loading=\"lazy\" alt=\"op_whatley18_Maryna TerletskaGetty Images_books\"\/>&#13;<br \/>\n&#13;<br \/>\n    <\/source><\/source><\/picture>&#13;<br \/>\n            <span class=\"image__copyright\">Maryna Terletska\/Getty Images<\/span>&#13;<br \/>\n    <\/figure>\n<p>&#13;<br \/>\n&#13;<br \/>\n        &#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n    &#13;<br \/>\n    &#13;<br \/>\n&#13;<br \/>\n<\/article>\n<p>&#13;\n                <\/li>\n<p>&#13;<\/p>\n<li class=\"slide\" id=\"editor-pick-63adea20c27ce2f252c66b44\" aria-hidden=\"true\" itemprop=\"itemListElement\" itemscope=\"\" itemtype=\"https:\/\/schema.org\/ListItem\">&#13;<br \/>\n                    <meta itemprop=\"position\" content=\"3\"\/>&#13;<br \/>\n                    &#13;<\/p>\n<article class=\"listing asize asize--c listing--contained\" data-url=\"russia-war-crimes-prosecute-putin-special-tribunal-icc-by-gordon-brown-2022-12\" data-page-subarea=\"main-article-a2\">&#13;<br \/>\n    <a href=\"https:\/\/news.google.com\/commentary\/russia-war-crimes-prosecute-putin-special-tribunal-icc-by-gordon-brown-2022-12\" title=\"Putting Putin and Company in the Dock\" itemprop=\"url\" tabindex=\"-1\" data-entity-type=\"document\" data-entity-id=\"63adea20c27ce2f252c66b44\" data-language=\"english\" data-event-action=\"click\" data-entity-link-name=\"russia-war-crimes-prosecute-putin-special-tribunal-icc-by-gordon-brown-2022-12\" class=\"track-event overlay\" data-href-original=\"https:\/\/news.google.com\/commentary\/russia-war-crimes-prosecute-putin-special-tribunal-icc-by-gordon-brown-2022-12\"><span class=\"u-tos\">Putting Putin and Company in the Dock<\/span><\/a>&#13;<br \/>\n&#13;<br \/>\n    &#13;<br \/>\n&#13;<\/p>\n<figure class=\"image image--ratio-c listing__image    \">&#13;<br \/>\n&#13;<br \/>\n       &#13;<br \/>\n&#13;\n    <picture>&#13;<br \/>\n&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/d3efcbc29d11e55e8d9ec4848be9a740.16-9-medium.1.jpg\" media=\"--xsmall\">&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/d3efcbc29d11e55e8d9ec4848be9a740.4-3-large.1.jpg\">&#13;<br \/>\n            <img src=\"https:\/\/webapi.project-syndicate.org\/library\/d3efcbc29d11e55e8d9ec4848be9a740.16-9-medium.1.jpg\" width=\"480\" height=\"270\" loading=\"lazy\" alt=\"brown91_ALEXEY NIKOLSKYSPUTNIKAFP via Getty Images_putin\"\/>&#13;<br \/>\n&#13;<br \/>\n    <\/source><\/source><\/picture>&#13;<br \/>\n            <span class=\"image__copyright\">Alexey Nikolsky\/Sputnik\/AFP via Getty Images<\/span>&#13;<br \/>\n    <\/figure>\n<p>&#13;<br \/>\n&#13;<br \/>\n        &#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n&#13;<br \/>\n    &#13;<br \/>\n    &#13;<br \/>\n&#13;<br \/>\n<\/article>\n<p>&#13;\n                <\/li>\n<p>&#13;<br \/>\n               &#13;\n            <\/ol>\n<p>&#13;<br \/>\n        &#13;<br \/>\n<\/aside>\n<p data-line-id=\"8d02d284ad5848278529f0da229837e6\"> In the private sector, the mountain of debt includes that of households (such as mortgages, credit cards, auto loans, student loans, personal loans), businesses and corporations (bank loans, bond debt, and private debt), and the financial sector (liabilities of bank and nonbank institutions). In the public sector, it includes central, provincial, and local government bonds and other formal liabilities, as well as implicit debts such as unfunded liabilities from pay-as-you-go pension schemes and health-care systems \u2013 all of which will continue to grow as societies age. <\/p>\n<p data-line-id=\"d56f079009b344db9c0735d3cb007f8c\"> Just looking at explicit debts, the figures are staggering. Globally, <a href=\"https:\/\/www.iif.com\/\">total private- and public-sector debt<\/a> as a share of GDP rose from 200% in 1999 to 350% in 2021. The ratio is now 420% across advanced economies, and 330% in China. In the United States, it is 420%, which is higher than during the Great Depression and after World War II. <\/p>\n<p data-line-id=\"11e7d207596c49588020fd7704238cc4\"> Of course, debt can boost economic activity if borrowers invest in new capital (machinery, homes, public infrastructure) that yields returns higher than the cost of borrowing. But much borrowing goes simply to finance consumption spending above one\u2019s income on a persistent basis \u2013 and that is a recipe for bankruptcy. Moreover, investments in \u201ccapital\u201d can also be risky, whether the borrower is a household buying a home at an artificially inflated price, a corporation seeking to expand too quickly regardless of returns, or a government that is spending the money on \u201cwhite elephants\u201d (extravagant but useless infrastructure projects). <\/p>\n<p data-line-id=\"bcd6f9e10433473e91080ed36395a73d\"> Such over-borrowing has been going on for decades, for various reasons. The democratization of finance has allowed income-strapped households to finance consumption with debt. Center-right governments have persistently cut taxes without also cutting spending, while center-left governments have spent generously on social programs that aren\u2019t fully funded with sufficient higher taxes. And tax policies that favor debt over equity, abetted by central banks\u2019 ultra-loose monetary and credit policies, has fueled a spike in borrowing in both the private and public sectors. <\/p>\n<p data-line-id=\"85ff7b671e1c465c8f539c844d2bbf54\"> Years of quantitative easing (QE) and credit easing kept borrowing costs near zero, and in some cases even negative (as in <a href=\"https:\/\/tradingeconomics.com\/euro-area\/interest-rate\">Europe<\/a> and <a href=\"https:\/\/tradingeconomics.com\/japan\/interest-rate\">Japan<\/a> until recently). By 2020, negative-yielding dollar-equivalent public debt was <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-11-06\/negative-yielding-debt-hits-record-17-trillion-on-bond-rally\">$17 trillion<\/a>, and in some Nordic countries, <a href=\"https:\/\/www.theguardian.com\/money\/2019\/aug\/13\/danish-bank-launches-worlds-first-negative-interest-rate-mortgage\">even mortgages<\/a> had negative nominal interest rates. <\/p>\n<div class=\"listing special asize inlay special--generic\" data-message-area=\"promotion-Commentary\" data-page-subarea=\"promotion-subscription\" dir=\"ltr\" lang=\"en-us\">\n            <a href=\"https:\/\/www.project-syndicate.org\/order\/subscription?route=commentary&amp;url=stagflationary-economic-financial-and-debt-crisis-by-nouriel-roubini-2022-12&amp;trigger=ArticlePromo&amp;redirect=%2Fcommentary%2Fstagflationary-economic-financial-and-debt-crisis-by-nouriel-roubini-2022-12\" data-entity-type=\"document\" data-entity-id=\"5e9580c62683e2a068ab2784\" data-language=\"english\" data-event-action=\"click\" data-entity-link-name=\"promotion-subscribe-generic\" class=\"track-event overlay\" data-href-original=\"https:\/\/www.project-syndicate.org\/order\/subscription?route=commentary&amp;url=stagflationary-economic-financial-and-debt-crisis-by-nouriel-roubini-2022-12&amp;trigger=ArticlePromo&amp;redirect=%2Fcommentary%2Fstagflationary-economic-financial-and-debt-crisis-by-nouriel-roubini-2022-12\"><span class=\"u-tos\">HOLIDAY SALE: Save $35 on any new PS subscription<\/span><\/a><\/p>\n<figure class=\"image image--ratio-c    \">&#13;<br \/>\n&#13;<br \/>\n       &#13;<br \/>\n&#13;\n    <picture>&#13;<br \/>\n&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/cd1f2f6b72e725a5d975b3a57f8652f3.16-9-medium.1.png\" media=\"--xsmall\">&#13;<source srcset=\"https:\/\/webapi.project-syndicate.org\/library\/cd1f2f6b72e725a5d975b3a57f8652f3.4-3-large.1.png\">&#13;<br \/>\n            <img src=\"https:\/\/webapi.project-syndicate.org\/library\/cd1f2f6b72e725a5d975b3a57f8652f3.16-9-medium.1.png\" width=\"480\" height=\"270\" loading=\"lazy\" alt=\"PS_Holiday-Sale_1333x1000_Alt\"\/>&#13;<br \/>\n&#13;<br \/>\n    <\/source><\/source><\/picture>&#13;<br \/>\n            <span class=\"image__copyright\"\/>&#13;<br \/>\n    <\/figure>\n<h2 class=\"special__title\">HOLIDAY SALE: Save $35 on any new PS subscription<\/h2>\n<div class=\"special__description\">\n<p>Gain greater access to PS \u2013 including every commentary and our On Point suite of subscriber-exclusive content \u2013 for as little as $49.99.<\/p>\n<\/p><\/div>\n<p class=\"special__button\">&#13;<br \/>\n                    <span>Save Now<\/span>&#13;\n                <\/p>\n<\/p><\/div>\n<p data-line-id=\"cb1213d7224047dd83c9529250164a90\"> The explosion of unsustainable debt ratios implied that many borrowers \u2013 households, corporations, banks, shadow banks, governments, and even entire countries \u2013 were insolvent \u201czombies\u201d that were being propped up by low interest rates (which kept their debt-servicing costs manageable). During both the 2008 global financial crisis and the COVID-19 crisis, many insolvent agents that would have gone bankrupt were rescued by zero- or negative-interest-rate policies, QE, and outright fiscal bailouts. <\/p>\n<p data-line-id=\"74fd479c0af44c99a7e308fd67be873e\"> But now, inflation \u2013 fed by the same ultra-loose fiscal, monetary, and credit policies \u2013 has ended this financial Dawn of the Dead. With central banks forced to <a href=\"https:\/\/www.reuters.com\/markets\/europe\/central-banks-raise-rates-again-fed-drives-global-inflation-fight-2022-09-22\/\">increase interest rates<\/a> in an effort to restore price stability, zombies are experiencing sharp increases in their debt-servicing costs. For many, this represents a triple whammy, because inflation is also eroding real household income and reducing the value of household assets, such as homes and stocks. The same goes for fragile and over-leveraged corporations, financial institutions, and governments: they face sharply rising borrowing costs, <a href=\"https:\/\/www.cnbc.com\/2022\/11\/17\/fear-is-mounting-that-slumping-retail-earnings-may-fall-lower-still.html\">falling<\/a> incomes and revenues, and <a href=\"https:\/\/www.imf.org\/en\/Blogs\/Articles\/2022\/10\/11\/interest-rate-increases-volatile-markets-signal-rising-financial-stability-risks\">declining<\/a> asset values all at the same time. <\/p>\n<p data-line-id=\"e8a04de268914c70b60b601c5f3a3e0c\"> Worse, these developments are coinciding with the <a href=\"https:\/\/www.worldbank.org\/en\/news\/press-release\/2022\/06\/07\/stagflation-risk-rises-amid-sharp-slowdown-in-growth-energy-markets\">return of stagflation<\/a> (high inflation alongside weak growth). The last time advanced economies experienced such conditions was in the 1970s. But at least back then, <a href=\"https:\/\/www.macrotrends.net\/1381\/debt-to-gdp-ratio-historical-chart\">debt ratios<\/a> were very low. Today, we are facing the worst aspects of the 1970s (stagflationary shocks) alongside the worst aspects of the global financial crisis. And this time, we cannot simply cut interest rates to stimulate demand. <\/p>\n<p data-line-id=\"e78c76b6c81e4498b0ec374e287c7e58\"> After all, the global economy is being battered by persistent short- and medium-term negative supply shocks that are reducing growth and increasing prices and production costs. These include the pandemic\u2019s disruptions to the supply of labor and goods; the impact of Russia\u2019s war in Ukraine on commodity prices; China\u2019s increasingly disastrous zero-COVID policy; and a <a href=\"https:\/\/www.project-syndicate.org\/onpoint\/age-of-megathreats-war-climate-debt-inflation-technology-by-nouriel-roubini-2022-11\">dozen other medium-term shocks<\/a> \u2013 from climate change to geopolitical developments \u2013 that will create additional stagflationary pressures. <\/p>\n<p data-line-id=\"2de2ab7e28e74ca7889e6a7672bca138\"> Unlike in the 2008 financial crisis and the early months of COVID-19, simply bailing out private and public agents with loose macro policies would pour more gasoline on the inflationary fire. That means there will be a hard landing \u2013 a deep, protracted recession \u2013 on top of a severe financial crisis. As asset bubbles burst, debt-servicing ratios spike, and inflation-adjusted incomes fall across households, corporations, and governments, the economic crisis and the financial crash will feed on each other. <\/p>\n<p data-line-id=\"bf480c231cb4488b886b48201e6f462d\"> To be sure, advanced economies that borrow in their own currency can use a bout of unexpected inflation to reduce the real value of some nominal long-term fixed-rate debt. With governments unwilling to raise taxes or cut spending to reduce their deficits, central-bank deficit monetization will once again be seen as the path of least resistance. But you cannot fool all of the people all of the time. Once the inflation genie gets out of the bottle \u2013 which is what will happen when central banks abandon the fight in the face of the looming economic and financial crash \u2013 nominal and real borrowing costs will surge. The mother of all stagflationary debt crises can be postponed, not avoided. <\/p>\n<\/p><\/div>\n\n<br \/><a href=\"https:\/\/news.google.com\/__i\/rss\/rd\/articles\/CBMieWh0dHBzOi8vd3d3LnByb2plY3Qtc3luZGljYXRlLm9yZy9jb21tZW50YXJ5L3N0YWdmbGF0aW9uYXJ5LWVjb25vbWljLWZpbmFuY2lhbC1hbmQtZGVidC1jcmlzaXMtYnktbm91cmllbC1yb3ViaW5pLTIwMjItMTLSAQA?oc=5\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>After years of ultra-loose fiscal, monetary, and credit policies and the onset of major negative supply shocks, stagflationary pressures are now putting the squeeze on a massive mountain of public- and private-sector debt. The mother of all economic crises looms, and there will be little that policymakers can do about it. NEW YORK \u2013 The &hellip;<\/p>\n","protected":false},"author":1,"featured_media":39377,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[161],"tags":[],"_links":{"self":[{"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/posts\/39376"}],"collection":[{"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/comments?post=39376"}],"version-history":[{"count":0,"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/posts\/39376\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/media\/39377"}],"wp:attachment":[{"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/media?parent=39376"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/categories?post=39376"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.brandon.ddtest.info\/multisite-test\/wp-json\/wp\/v2\/tags?post=39376"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}