Commentary
“The decade ahead may well be a Stagflationary Debt Crisis the likes of which we’ve never seen before,” warns New York University economics professor emeritus Nouriel Roubini, who has the distinction of having forecast the home mortgage-driven 2008 financial debacle as early as 2006.
The Turkish-born Roubini is no conservative, having served on President Bill Clinton’s Council of Economic Advisers and as adviser to Clinton Treasury Secretary Timothy Geithner. Yet he sees the Biden administration marking the beginning of “a new era of Great Inflationary / Stagflationary Instability.”
He fears the repeat of the recessionary, inflationary conditions of the 1970s, but with an added negative: high debt levels. According to Roubini, “Between today’s surging stocks of private and public debts (as a share of GDP) and the huge unfunded liabilities of pay-as-you-go Social Security and health systems, both the private and public sectors face growing financial risks.” And when it is clear to all that the economy is in a protracted nosedive, Roubini worries “that central banks will wimp out and blink, and not be willing to fight inflation. In this case, the Great Moderation of the past 30 years may be over,” he cautions. Roubini cited the example of the Bank of England last fall undertaking an emergency quantitative-easing program in reaction to the market turmoil that followed the announcement of major tax cuts by the British government (later reined in)….