"It's Not Going To Be A Short And Shallow RECESSION" – Nouriel Roubini FINAL WARNING

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01. it's not going to be a short and shallow recession it's going to be a severe one but then they have a crash of the stock market a crash of the bond market with interest rates going much higher a crash of credit markets with the interest rates on private loans Rising significantly and that economic and financial Cris is going to be so damaging and as I said if you cannot raise taxes cut spending you have to use the inflation tax in the UK and Us in Europe we're borrowing our own local currency and if you had the bout of unexpected inflation inflation can reduce the real value of nominal debt at fixed interest rates of long duration but it's a tax we're taxing creditors and Savers to redistribute income and wellth to those where borrowers and deor and is that a tax that actually is not even decided by a parliament or by a political government but is decided by the central banks so I do believe that actually given the rise of debts private and public we are in what economists call a debt trap there's so much private and public debt that there'll be an incentive to try to wipe it out with a bout of unexpected inflation we don't want to raise taxes enough we don't want to cut spending enough so we're going to use the inflation tax to resolve this problem is a form of default however it's a capital levy on Savers and creditors and all who hold public and private debt increase of inflation we' have had in advanced economies like the UK Europe and us is driven in part by what people refer to as being bad policies loose monetary fiscal and credit easing during the covid crisis too much for too long but then we also had a series of negative aggregate supply shocks that reduce growth and increase the cost of production the first one was the impact of covid on production of goods and services on the supply of labor and on Global Supply chains the second one was the impact of the Russian invasion of Ukraine on commodity prices oil natural gas food fertilizer Industrial Metals and three the zero covid policy of China led to further Global Supply bottlenecks so is a combination of bad policy and bad luck in the case of the UK there was also a self-inflicted wound because the decision of brexit reduces potential growth from about 2% to maybe 1 and a half it increases the cost of production you have less migration you have frictions in international trade and therefore it's also a stack flary process so on the supply side we have this shocks but over the medium term there are other shocks that are medium-term stationary de globalization reshoring of manufacturing to high cost countries French Shoring aging of population restrict to migration decoupling between us and China global climate change pandemic cyber warfare weaponizing our currencies as a tools of national and foreign policy a backlash against income and wealth inequality these are all factors that are more medium-term they're all stack inflationary they reduce potential growth they increase the cost of production on the supply side on the demand side central banks are saying we're going to fight inflation at any cost and we're going to go back to 2% in my view they're not credible they're going to Blink they're going to wimp out because if they try to raise interest rates to fight inflation not only they cause a hard Landing a recession and it's not going to be a short and shallow recession it's going to be a severe one but then they have a crash of the stock market a crash of the bond market with interest that's going much higher a crash of credit markets with the interest rates on private loans Rising significantly ly and that economic and financial Cris is going to be so damaging they're going to Blink they're going to monetize deficits and as I said if you cannot raise taxes cut spending you have to use the inflation tax I usually say I'm not Dr Doom I'm Dr realist but of course it's not as catchy to be called Doo realist there are some upside there are some downside unfortunately I feel that for the last 20 years we've been kicking the count down the road we're putting our head heads on the the sound like ostriches where and we're not addressing the fundamental threats economic monetary Financial political geopolitical technological environmental health there are major threats that are all connected with each other and say slow motion train wreck there is no free Lune for any problem you have to incur short-term cost to improve these threats over the medium long term and the political economy of reforms and of pain is that very few people are willing as governments and countries and politician to accept the shortterm pain for the long-term benefit because those politicians are not going to be in power so there is a bias about kicking the count down the road