Wake up and smell the coffee, says Nouriel Roubini, the chief economist of Atlas Capital who predicted the financial crisis of 2007-09.
“A host of interconnected mega-threats is imperiling our future,” he wrote in a commentary on Project Syndicate.
“The stubbornly low inflation of the pre-pandemic period has given way to today’s excessively high inflation.”
In addition, “secular stagnation — perpetually low growth owing to weak aggregate demand —has evolved into stagflation, as negative supply shocks have combined with the effects of loose monetary and fiscal policies.”
Interest rates are soaring, “creating the risk of cascading debt crises,” Roubini said. Deglobalization and protectionism are the rules of the day.
Roubini Sees History Repeating Itself
“We are therefore facing not only the worst of the 1970s (repeated negative supply shocks), but also the worst of the 2007-08 period (dangerously high debt ratios) and the worst of the 1930s,” he said.
Roubini compares this era to the period between 1914 and 1945. “The first era of globalization was not sufficient to prevent the descent into world war in 1914,” he noted.
“That tragedy was followed by a pandemic (Spanish flu); the 1929 stock market crash; the Great Depression; trade and currency wars,” Roubini explained.
“It was these crisis conditions that underpinned the rise of fascism in Italy, Nazism in Germany, and militarism in Spain and Japan, culminating in World War II and the Holocaust.”
Now there are new threats, such as climate change; pandemics; and artificial intelligence, which could mean more inequality and deadlier weapons.
“All of [the current] problems are fueling a backlash against democratic capitalism, and empowering extremists from both the right and the left,” Roubini said.
“In the near term, we can expect more instability, more intense conflict, and more frequent environmental disasters…. A new geopolitical depression is increasing the likelihood of cold and hot wars that could all too easily overlap and spin out of control.”
Roubini Mocks Cryptocurrency
Meanwhile, Roubini lambasted the cryptocurrency industry in an interview with Yahoo at the Davos World Economic Forum.
“FTX and Sam Bankman-Fried aren’t the exception, they’re the rule,” he said referring to the bankrupt crypto company and its ousted, indicted founder.
A whopping “99% of crypto is a scam -- criminal activity,” Roubini said. “It’s a total bubble-Ponzi scheme going bust.”
A few thousand people “lost their shirts” in the two-decade-long scheme of Ponzi king Bernard Madoff that ended in 2008, Roubini said. Meanwhile, “FTX alone had 1 million customers.”
He also expressed skepticism about blockchain, a distributed database shared along a computer network that’s used to trade cryptocurrencies.
“I think it’s the most hyped technology ever,” Roubini said. “You can’t create trust with technology alone. You need a credible institution to validate transactions.”
In the end, “blockchain is a glorified database,” he said. “It’s totally useless technology that wastes a lot of energy.”
