Dr. Doom Roubini lists top 10 threatening Corona trends

Economist Nouriel Roubini made a name for himself during the financial crisis of the first decade. As he correctly predicted what would happen to the mortgage securities market, people have dubbed him Dr. Doom ever since then. And in the current corona times, Roubini is not predicting any uptick soon. On the contrary, it can even get worse. He sketches a jet black scenario for the future. In a column on the MarketWatch website, he mentions ten developments which can plunge the world economy into an even deeper crisis than is already the case. Fasten your seatbelts!

1. Unsustainable debts

Governments are throwing emergency relief to companies and workers affected by the corona virus. That keeps the economy going, but isn’t it too much of a good thing? Roubini thinks so. According to him, government debt in some countries was already unsustainable before the crisis. Covid-19 only makes things worse. There are also private debts. As income levels are likely to fall sharply, those debts also become unsustainable. Economic recovery is therefore becoming much more difficult this time than after the 2008 credit crisis.

2. Demographic time bomb

Apart from corona, the expenditure on health care will explode in the coming years due to the growing number of elderly people. Aging is increasingly difficult to finance for governments that are deeply in debt.

3. Deflation

Falling prices. That’s a nice thing isn’t it? No, not at all, Roubini claims. He expects the corona recession to be accompanied by falling prices and wages across the board. Numerous machines and factories will be shut down. Mass unemployment and plummeting commodity prices threaten due to permanent overcapacity. To make matters worse, deflation is causing rising debt levels, which will cause more and more companies to go bankrupt.

4. Inflation

In the coming period, central banks will use even more radical instruments to fight deflation and keep interest rates low. There will come a time – certainly if the trend towards more protectionism continues – that inflation will resurface. The world then enters a phase of stagflation and declining purchasing power.

5. Growing inequality

Roubini does not believe, like Rutger Bregman or Thomas Piketty, in a cleansing effect of the crisis on inequality in the world. If millions of people lose their jobs or start working less, he believes the income and wealth differences will only widen.

Rich countries will bring part of their production back home. But because wages in the West are incomparable to those in poor countries, there will be a trend towards even more automation and robotization. This will put further pressure on wages for the working class. This then leads to more populism, nationalism and xenophobia.

6. Deglobalization

The corona crisis will cause the struggle between the superpowers China and the US to ignite again. The two power blocks will drift further apart and elsewhere in the world this will also be felt in more protectionism and nationalism. The war over mouth masks and respirators was only the beginning.

7. Democracy under pressure

Political leaders will use the crisis and growing nationalism to gain more power. In some countries this will lead to a loss of democratic values ​​and norms.

8. China-US trade war

The language from Washington and Beijing has become increasingly raw lately. Roubini believes this will only get worse. We are in for a brutal trade war between the two most powerful countries in the world. Technological warfare and cyber crime will be central to this.

9. Political conflicts

Even worse, a Sino-American trade war can lead to deeper – perhaps even armed – conflict elsewhere in the world.

10. Environment and climate change

We now know how much damage the coronavirus can do. But there are more viruses and natural disasters that can cause serious damage. Global warming will occupy us for a long time, according to Roubini.

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