Monday, August 12, 2019

Roubini Warns of a Crisis in 2020

Nouriel Roubini is often called “Dr. Doom” because of his knack for predicting big market changes. He is well-known to have red-flagged the housing bubble crisis of 2007/2008 that pushed the global economy to the back foot. And now, Roubini has a new warning. The economist predicts a big financial crisis in 2020. He believes that the U.S.-China trade conflict is the biggest risk for global markets, something that could escalate in various ways over the next year.

A crisis in 2020 “The Trump administration could decide to extend tariffs to the US$300 billion worth of Chinese exports not yet affected. Or prohibiting Huawei and other Chinese firms from using U.S. components could trigger a full-scale process of de-globalization, as companies scramble to secure their supply chains. Were that to happen, China would have several options for retaliating against the U.S., such as by closing its market to U.S. multinationals like Apple. Under such a scenario, the shock to markets around the world would be sufficient to bring on a global crisis, regardless of what the major central banks do,” he writes at Project Syndicate.

Last year, Roubini and colleague Brunello Rosa laid out 10 events that could trigger a financial crisis in 2020. While the U.S.-China trade conflict was one of them, another major risk highlighted was the fiscal policy. At present, U.S. economic growth is being pushed forward through a stimulus policy that pumps money into the economy. But by 2020, this stimulus will end. As a consequence, U.S. GDP growth will come down from around 3 to below 2 percent

Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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