The Coming Greater Depression of the 2020s: Economist Nouriel Roubini [View all]

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- 'The Coming Greater Depression of the 2020s. - Project Syndicate, Apr 28, 2020 | By Nouriel Roubini (*See below). While there is never a good time for a pandemic, the COVID-19 crisis has arrived at a particularly bad moment for the global economy. The world has long been drifting into a perfect storm of financial, political, socioeconomic, and environmental risks, all of which are now growing even more acute. - Note, HEAVY. Excerpts, Ed.:

NEW YORK – After the 2007-09 financial crisis, the imbalances and risks pervading the global economy were exacerbated by policy mistakes. So, rather than address the structural problems that the financial collapse and ensuing recession revealed, governments mostly kicked the can down the road, creating major downside risks that made another crisis inevitable. And now that it has arrived, the risks are growing even more acute. Unfortunately, even if the Greater Recession leads to a lackluster U-shaped recovery this year, an L-shaped “Greater Depression” will follow later in this decade, owing to ten ominous and risky trends.

- The first trend concerns deficits and their corollary risks: debts and defaults...

- A second factor is the demographic time bomb in advanced economies...

- A third issue is the growing risk of deflation...

- A fourth (related) factor will be currency debasement...

- A fifth issue is the broader digital disruption of the economy. With millions of people losing their jobs or working and earning less, the income and wealth gaps of the twenty-first-century economy will widen further. To guard against future supply-chain shocks, companies in advanced economies will re-shore production from low-cost regions to higher-cost domestic markets. But rather than helping workers at home, this trend will accelerate the pace of automation, putting downward pressure on wages and further fanning the flames of populism, nationalism, and xenophobia.

- This points to the sixth major factor: de-globalization. The pandemic is accelerating trends toward balkanization and fragmentation that were already well underway. The United States and China will decouple faster, and most countries will respond by adopting still more protectionist policies to shield domestic firms and workers from global disruptions. The post-pandemic world will be marked by tighter restrictions on the movement of goods, services, capital, labor, technology, data, and information. This is already happening in the pharmaceutical, medical-equipment, and food sectors, where governments are imposing export restrictions and other protectionist measures in response to the crisis.

- The backlash against democracy will reinforce this trend. Populist leaders often benefit from economic weakness, mass unemployment, and rising inequality. Under conditions of heightened economic insecurity, there will be a strong impulse to scapegoat foreigners for the crisis. Blue-collar workers and broad cohorts of the middle class will become more susceptible to populist rhetoric, particularly proposals to restrict migration and trade.
- This points to an eighth factor: the geostrategic standoff between the US and China...
- A final risk that cannot be ignored is environmental disruption, which, as the COVID-19 crisis has shown, can wreak far more economic havoc than a financial crisis.. Recurring epidemics..Pandemics and the many morbid symptoms of climate change will become more frequent, severe, and costly in the years ahead...

More https://www.project-syndicate.org/commentary/greater-depression-covid19-headwinds-by-nouriel-roubini-2020-04

American Nouriel Roubini (aka 'Dr. Doom') is one of the few prominent economists credited with predicting the 2008 financial crisis. He is professor of economics at NYU Stern School of Business and has worked for the IMF, the US Federal Reserve, and the World Bank. https://en.wikipedia.org/wiki/Nouriel_Roubini