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Winter Cometh: Recession Too

The entire world is going to face another economic recession that will be worse than the 2008 financial disaster. Economist Nouriel Roubini has predicted that it might hit the US first by the end of 2022. The Iranian-American economist has further predicted that the recession would rock the entire world at the end of 2022, and could last till 2023. Incidentally, Roubini was one of those economists who had rightly predicted the global recession in 2008.

Roubini, who teaches at Stern School of Business of New York University, is the Chairperson of the economic consultancy firm, Roubini Macro Associates LLC. Talking to the media, he recently said that the stock market usually falls by 30% in case of a plain vanilla recession. It is called Standard and Poor’s 500 (S&P 500) in terms of Stock Market index. In this case, the Stock Market may also fall by nearly 40%.

Nouriel Roubini

There was a virtual collapse seen in the US stock market in 2008. The entire Banking System was about to collapse under the pressure of bad loans and financial irregularities. Interestingly, Roubini had predicted the crisis long before. Hence, he was called Doctor Doom. This time, he has said: “Many zombie institutions, zombie households, corporates, banks, shadow banks and zombie countries are going to die. So, we’ll see who’s swimming naked.

Roubini has stated that there shall be no fiscal remedies when the world will fall into recession, because the Governments, with too much debt, are “running out of fiscal bullets“. According to Dr Doom, high inflation would mean that “if you do fiscal stimulus, you are overheating the aggregate demand“. He sees a stagflation similar to that in the 1970s, and also a massive financial debt. “It is not going to be a short and shallow recession, it is going to be severe, long and ugly,” he reportedly stressed.

Meanwhile, Roubini has advised investors to keep more cash with them, and not to concentrate on equities, stating: “You have to be light on equities and have more cash. Though cash is eroded by inflation, its nominal value stays at zero, while equities and other assets can fall by 10%, 20%, and 30%.

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