Nouriel Roubini Speaks On U.S Banking Crisis & Global Recession | Indianomics | CNBC-TV18

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01. welcome back to this very special indianomics I have been speaking with Dr nurial rubini and uh we will be speaking right now about his latest book Mega threats which has got raved reviews from a whole host of economists Dr rubini thank you very much for waiting on well one point that you point out both in the project Syndicate article and in the uh a book Mega threats is the likelihood of protracted inflation uh given the fact that you know there is French Shoring and near Shoring as you point out higher protectionism as well as uh you know this Chase for green green inflation as you call it uh can you tell us I mean is this what we are is the period of deflation over is it behind us and are we clearly leading into a medium-term inflation yes we are both for supply-side reasons and demand side reason on the supply side there are a number of medium long-term speculationary shocks and Trends they reduce potential growth and increase the cost of production they are restrictions to trade protection is when the globalization uh restoring and friend Shoring aging of population in many countries restriction to migration geopolitical depression and decoupling global climate change pandemics backlash against income and wealth inequality cyber warfare and weaponizing the Dollar on the demand side we live in a world where there is so much private in public that the central banks try to raise interest rates to fight inflation because an economic and financial crash will be structural budget deficits where to spend more on security to fight climate change to fight the next pandemic to fight the robotic Automation and implication of our jobs and to reduce inequality all those things imply more government spending that constrains how much we raise taxes will have structural larger budget deficits that either crowd our growth or the cause of that crisis or if we monetize them we can wipe out some real value of this debt and deficits through inflation so I fear that the path of this resistance is going to be to monetize and higher average inflation not very high in advanced economies but not two percent maybe six percent or so in advance economies oh that changes the grammar of international finance all together if we have to have you know a six percent uh Western Nation inflation uh well uh I'll come to that in a minute but uh coming back to Mega threats you know one of the big things you point out is the likelihood of War because of this alternate uh uh set of countries Iran North Korea Russia and China challenging the system put in by the Western Nations you know we have come to the brink of War even during the Cold War I mean the Cuban Missile Crisis uh and uh other such flash points but we moved back uh do you do you not think that we will move away from the brink even in the times to come well certainly we'll have a cold Wars are getting colder whether those Cold War lead to outright hot war is to be seen hopefully not but even a situation of Cold War is going to imply decoupling fermentation balkanization and speculationary shock but look we already have a hot War because of the brutal Russian invasion of Ukraine this year this war could become unconventional could involve NATO I was Jerusalem in Israel but it's clear that Iran is becoming a threshold nuclear State Israel would have to think of whether to bomb Iran or not either way they'll be caused and the cold war between U.S and China is becoming colder by the day there could be a looming conflict on the issue of Taiwan but China is also territorial disputes with half a dozen countries in Asia there are thousands of miles of the border between China and India that are disputed the disputes with Japan with Vietnam with Indonesia with the Philippines and those tensions at some point could reach the boil now the China is stopped to hide their strength and by their time their projecting power all over Asia oh yes sir that is several flash points and several of them on our border as well uh the inflation point that you're making it's extremely convincing that we are not returning to the period of deflation there is a medium-term inflation threat in front of us if that is the case then what are the changes that you see do you see changes to currency do you see uh a reduction of global growth itself reduction of global trade itself because of this inflation threat yes the combination of inflation and negative Supply shock implies the world where there is lower growth and higher inflation that is bad of course for U.S and Global equities but is even worse for bonds last year when U.S treasury yields for 10 years went from one percent to three and a half you got 20 losses on bond prices worse than SNP than 15 suppose that The New Normal is six percent inflation then 10-year treasure yields they'll have to go eventually to eight percent six percent for inflation and two percent real now there are three and a half they go from three and a half eight percent you have another 50 losses on what is supposed to be a safe secure and defensive assets trillions of dollars of dollars treasuries or em that linked to the dollar or of a high yield and I grade the bonds so the risk of significant losses both in bond markets and in women in credit markets are significant okay well there should be a rush to buying commodity and commodity stocks and gold as you point out uh that seems to be the only Safe Harbor at this point in time uh well Dr rubini you know of all the threats that you mentioned which do you think is more imminent can happen and a related question or can science cure the problems that science has led us to like you know after all vaccines cured the pandemic so do you think science and Sensibility can still prepare well in the short run we have to worry about inflation okay about recession and speculation about high debts and high interest rates causing that crisis what I call the risk of a great stagflationary debt and financial instability but some of the medium-term threats are becoming more approximate the risk of War and the geopolitical depression is becoming front loaded the cost of global climate change the risks that come from the another Global pandemics has severe if not more severe than uh covid-19 and of course with generative AI the risk of displacement of many jobs Blue Collar high collar the white collar but even great becoming a looming thing yeah technology can help us if we have major technological Revolution AI robotic automation machine learning maybe we find a solution to climate change maybe we can increase they can economic pie and make that more sustainable maybe we can find faster a cure for not only kovid but other diseases we may even reduce some of the geopolitical tension if there is greater economic growth but on the other side of AI machine learning robotic automation leads to permanent technological unemployment increases in wealth inequality it might even lead us to build bigger weapons to fight a bigger Cyber Wars so we have to make sure that technology is used to increase the economic High to redistribute it to everybody and to create peace progress and prosperity as opposed to more inequality and more violent conflicts among the Rival powers well ultimately Good Sense has to Prevail isn't it whether it assigns or whether it is politics point taken Dr Vinnie this conversation when I'm sure good more readers more viewers to read your book and ensure that those dangers don't pan out the way you have described them thank you very much for joining us in this conversation such a pleasure being with you today thank you foreign