roubini171_Spencer PlattGetty Images_recession looming

Economics

الانهيار الـمُـحَـتَّـم

Dec 2, 2022 Nouriel Roubini

نيويورك ــ يترنح الاقتصاد العالمي الآن متجها نحو حشد غير مسبوق من الأزمات الاقتصادية والمالية وأزمات الديون، في أعقاب انفجار العجز والاقتراض والإنفاق بالاستدانة (الروافع المالية) في العقود الأخيرة.

في القطاع الخاص، يشمل جبل الديون تلك المستحقة على الأسر (مثل قروض الرهن العقاري، وبطاقات الائتمان، وقروض السيارات، وقروض الطلاب، والقروض الشخصية)، والمستحقة على الأعمال التجارية والشركات (القروض المصرفية، وديون السندات، والديون الخاصة)، وديون القطاع المالي (الخصومات المستحقة على المؤسسات المصرفية وغير المصرفية). وفي القطاع العام، يشمل جبل الديون سندات الحكومات المركزية والإقليمية والمحلية وغير ذلك من الالتزامات الرسمية، فضلا عن الديون الضمنية مثل الالتزامات غير الممولة من خطط معاشات التقاعد المدفوعة أولا بأول وأنظمة الرعاية الصحية ــ وكل هذا سيستمر في النمو مع تزايد الشيخوخة السكانية.

بمجرد إلقاء نظرة على الديون الصريحة نجد أن الأرقام مذهلة. على المستوى العالمي، ارتفع إجمالي ديون القطاعين العام والخاص كحصة من الناتج المحلي الإجمالي من 200% في عام 1999 إلى 350% في عام 2021. والآن أصبحت النسبة 420% في مختلف الاقتصادات المتقدمة، ونحو 330% في الصين. في الولايات المتحدة، بلغت النسبة 420%، وهذا أعلى مما كانت عليه أثناء فترة الكساد العظيم وبعد الحرب العالمية الثانية.

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Nouriel Roubini

Writing for PS since 2007
174 Commentaries

Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is Chief Economist at Atlas Capital Team, CEO of Roubini Macro Associates, Co-Founder of TheBoomBust.com, and author of MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, 2022). He is a former senior economist for international affairs in the White House’s Council of Economic Advisers during the Clinton Administration and has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com.

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0 Comments on this paragraph, 18 Comments on this article

Andrew Dabrowski Dec 7, 2022

Hasn't Roubini been predicting imminent disaster since 2012?
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vic lai Dec 6, 2022

Instead of concentrating on the coming short-term stagflationary pressures in the country, the US watchers should pay even more attention to the long-term healthy and sustained productivity growth in the US, which, if realized, will
(a) much improve and sustain the overall healthiness of the US consumers' balance sheets, enabling the country to continue to
(i) practice consumer-spending-led economic growth, and
(ii) act as the world's unique consumers of last resort,
(b) be Goldilocks-like job-promoting and non-inflationary in the domestic macroeconomy, and
(c) prevent China from quickly catching up with the US.
---
The US's recent stimulus-check-giving MMT-like experiment has also been able to much improve the US consumers' overall balance sheets, but only at the cost of the further worsening of the US Treasury's balance sheet, and so is just a zero-sum game, highly inflationary (especially if accompanied by supply-chain disruptions and war-induced energy crises), and hence is not sustainable.
Only long-term real economic GDP growth, prompted by the country's massive productive real investments in the real economies in the coming decade, can the US consumers' balance sheets keep improving in a healthy and sustainable manner, thereby also improving the government's tax-collecting ability in the future, and turning the above zero-sum game into a positive-sum game.
---
But this requires the US federal government to take the lead and to further deficit-spend en masse to help crowd in all sorts of productive private real investments in the domestic macroeconomy in the coming decade.
This can be done by, say,
(i) setting up an US Infrastructure and Energy Bank in the country,
(ii) the US Fed's new rounds of new-money-printing QEs, not to finance the US consumers' spending but to indirectly or directly finance the country's promising SME IPOs (especially for the hopeful unicorns in the ICT and new-energy sectors) in the country's stock markets in the coming decade,
(iii) attracting more and more European and Asian competitive foreign enterprises to migrate to and set up new businesses in the US, and to encourage some of the country's numerous FDI investments abroad to return back to the US.
---
- Colin Haller Dec 8, 2022
  
  Every time you reference MMT your ignorance of what it actually as as opposed to what you imagine it to be only becomes clearer. Just stop including it, since it adds nothing to your argument -- it only detracts from it by damaging your credibility.
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- vic lai Dec 7, 2022
  
  In 2010, the world's total GDP was US$ 66.0 trillion.
  In 2021, the world's total GDP was US$ 96.1 trillion, meaning a total increase of US$ 30.1 trillion in the past decade.
  In this decade, China's GDP increased from 5.9 trillion to 17.7 trillion, for a total increase of 11.8 trillion, and the US's GDP increased from 14.5 trillion to 23 trillion, for a total increase of 8.5 trillion.
  For both countries as a whole, the total increase in GDP was 20.3 trillion, and so only 30.1 - 20.3 = 9.8 trillion was left behind to be shared by all the other countries (say around 200) in the world.
  ---
  9.8 trillion / 200 = 49 billion, which means in the past decade, each of the 200 other countries could on average only grow her own cake by a meager US$ 49 billion.
  Note also that both China and the US have each generated the biggest amount of famous-world-brand ICT giants during the past decades.
  So, without much faster and persistent growth in the world's total GDP, there also seems to have been a near-zero-sum game going on between all the countries at the world level, in which both China and the US have been getting a much bigger share of the slowly growing global GDP cake, at the expense of all the other countries.
  ---
  The main reason of the current status quo should be that another Godot-like brand-new grand technological breakthrough (or the 4th Industrial Revolution on this planet, however defined) still hasn't solidly arrived yet, and so today's global GDP cake can only keep growing at a relatively slow pace, and is not becoming bigger and bigger fast enough to turn the near-zero-sum economic growth game into a persistent positive-sum one which will benefit non-trivially almost all the countries under the sun.
  The US's shale revolution has only given the US a decade of economic outperformance relative to most other countries, but it's not been strong enough to quickly further increase the size of the world's GDP cake.
  ---
  That's why the "non-interventionist" states in the West have to seriously transform themselves into new "entrepreneurial" states, by taking the lead to help start as many productive real investment projects in their real economies as possible in the coming decade.
  If they do not make the necessary transformations, they may quickly be overtaken by catching-up China in the foreseeable future.
  ---
  - vic lai Dec 7, 2022
    
    Whether we'll see the unavoidable crash in the US in the coming years depends to a large extent on whether the US Fed(-cum-US Federal Government) once again overreacts to this year's relatively high and stable inflation and employment figures, just like they did overreact to the pandemic breakout in the country since February 2020 by the central bank's following rounds of dropping of too much helicopter money into the houses of the US households.
    According to Alex Gurevich, what also matters a lot is the following two words : policy lag.
    ---
    According to him, both the high but stable inflation and the strong but stable employment that we're now seeing in the US are the results of extremely profligate fiscal and monetary policies in the country in late 2020 and early 2021.
    With a certain policy time lag, today's consumer spending is therefore still quite strong, so are the country's employment figures and inflation rates.
    If the Fed's ongoing inflation-fighting rate-hiking and QT cycles persist and keep going too far, what we'll probably see in late 2023 and early 2024 will be the reverse of everything we're now witnessing :
    (i) very strong US dollar,
    (ii) falling asset prices (perhaps even popping of the everything-asset bubble),
    (iii) reduction of balance sheets,
    (iv) weakening of commodity prices,
    (v) even falling food and energy prices (irrespective of the amount of shortages of food and energy still lingering at that time, because there's simply not enough US dollar around to pay for them),
    (vi) falling down of the general price level (deflation), and
    (vii) economic stagnation or recession.
    ---
    The real economic risk is that the US monetary authority will, for political and many other reasons, switch like a pendulum ball from one extreme back to the opposite extreme, causing most of the above time-lagged, unintended, but harmful economic results that can more or less be predicted quite reliably right now.
    ---
    - vic lai Dec 8, 2022
      
      Milton Friedman's claim more than 40 years ago that inflation is entirely made in Washington and nowhere else is still correct today.
      Events such as war-induced oil- and gas-price increases, crop shortages, and pandemic-caused global-supply-chain disruptions, only send the prices of those goods up relative to other things, but they don't produce inflation.
      There's one and only one basic cure for inflation: slowing monetary growth.
      The US Fed's current monetary policy should revolve around the growth rate of the country's money supply (which affects the subsequent GDP growth rate); that's the key, not the interest rates.
      ---
      This year alone, the US M2 YoY money supply growth rate has been dropping too quickly, from 11.75% on January 31, 2022 to only 1.28% on October 31, 2022, instead of Milton Friedman's proposed one-percentage-point drop of the annual M2 growth rate year by year to fight inflation.
      Which means, recently the US money supply growth has erratically been propping up and dropping down too quickly and suddenly during a too-short period of time, thereby causing too-much undesired first inflationary and then recessionary pressure to the US real-economy as a result.
      ---
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Barry Rosenfeld Dec 5, 2022

Is anyone capable of offering a prescription? Repent? Make amends? Accept some level of higher inflation, e.g., 3-4% as an intermediate target? Two percent was only a consensus number: it still meant inflation, but within the need of higher prices to encourage investment. Can we live in a 3.5% inflation universe if it means that a severe recession can be avoided? Any takers?
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Andrew Dabrowski Dec 4, 2022

Hasn't Roubini been predicting imminent disaster since 2012?
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Frans Verhagen Dec 3, 2022

I agree with Dr. Roubini’s analysis of the monetary, financial, and fiscal condition of the world economy. However, as a sustainability sociologist of international development, I think he must add the issue of gross and increasing inequality within and between nations to his conclusion of an “unavoidable crash”.

Unfortunately, Dr. Roubini does not present a monetary, financial, fiscal, and commercial framework that would prevent that global recession or crash. The International Institute for Monetary Transformation is proposing such framework in the TTRIMS (Tierra TRansformed International Monetary System) sustainability framework of international development. This monetary sustainability framework contains a decarbonization-based international monetary system together with its associated money-based financial system, inequality-reducing fiscal system, and an UN supervised trading system. Cf. https://transformmoney.org.

The first step for this transformed international monetary system is for the General Assembly to convene the 2023 UN Commission on Monetary Reform and Transformation, and its associated 2024 UN Foundational Convention, actions that resemble Bretton Woods 1.0 in 1944. Notwithstanding the emergencies in climate, health, and since the Russian war in the Ukraine, in food and governance, the reformist Bretton Woods 2.0 of the IMF is not bold enough to deal with those emergencies. A transformational Bretton Woods 3.0 would include good reformist policies and programs as it proceeds to create and allocate the UN Peoples' Bank’s abundant resources of trillions of digital Tierra currency.
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vic lai Dec 3, 2022

The market's widespread expectation of the probable arrival of a deep economic recession in the US in the near future, as shown by so many worsening forward-looking inverted yield curves, is said to be like waiting for Godot, who never arrives, thanks mainly to the still-ample remaining Covid liquidity still circulating in the country.
---
In the US at least, this time is really quite different.
In particular, the flying specter of stagflation
(i) that's constantly been haunting the US domestic economy since the Fed's latest fast and hawkish rate-hiking and QT cycles, but
(ii) that hasn't solidly arrived up until today (as shown by the latest US September Nonfarm Payrolls),
can be exorcised this time in a manner different from that in the good old days (when only OMOs can be used), thanks to the Fed's newly-installed Interest Rate Corridor (IRC) after the enactment of her QE programs, which is upper-bounded by the commercial banks' Interest Rate on Reserve Balances (IORB), and lower-bounded by the O/NRRR rate.
---
This time is different in the sense that, to help prevent the eventual arrival of Godot-like recession in the US, the Fed can
(a) keep raising and hence maintaining the IRC at a suitably high level for an extended period of time, to keep fighting domestic runaway inflation (caused mainly by the Fed's latest over-enthusiastic stimulus-check-giving MMT-like experiment),
(b) turn the now-idle but potentially inflationary commercial bank reserves and O/NRRR savings now sleeping in the Fed's balance sheet into the new capital of a newly-set-up US Infrastructure and Energy Bank (USIEB), by inducing those buyers to buy the newly-issued non-voting preferred stocks of the USIEB, at a preferred dividend rate say 2 percentage points higher than the expected highest IORB attained by the rising IRC in the Fed's current round of rate-hiking cycle.
---
The new credits and hence the new money supplies created by the USIEB in the coming years can help crowd in many new real-economy private investments of all kinds, both to prevent the domestic unemployment rate from rising too quickly in the future years and to increase the country's aggregate supply to help fight domestic runaway inflation.
---
- vic lai Dec 4, 2022
  
  Even the US Fed chairman Jerome Powell admitted honestly and correctly this year that the US's recent inflation rate already started climbing up quickly and non-trivially before the start of the Ukraine War in February this year.
  But today so many people still firmly believe that the current runaway inflation in the US has mostly been caused by supply-side cost-push factors (which only affect the related relative prices, not the general price level) and they keep comparing the current period with the 1970s.
  ---
  According to Richard Werner, if we study the inflation situations say in Germany in the 1970s more carefully, we'll find out correctly that Germany's credit boom started in 1971, and peaked in March 1973, following the country's highest bank credit growth hitherto in the postwar era.
  But the Yom Kippur War, also known more popularly as the Fourth Arab–Israeli War or the October War, started in Autumn 1973.
  Credit growth caused the high inflation of the 1970s, not the war, nor the oil price shock.
  ---
  Another "proof" is given by Japan's inflationary experiences in the same 1970s period.
  In the first oil embargo, Japan suffered a very high domestic inflation problem in her country, but not any more during the second oil shock in the late 1970s, simply because Japan had controlled her own money supply growth this time.
  ---
  To prevent the coming widely expected economic recession from being eventually realized in the US in the near future, great care must be taken by the US Fed to
  (i) closely monitor the country's coming money supply growth, to prevent the M2 growth rate from quickly dropping to a too-low or even negative level for too long a period of time in the coming quarters as a result of the central bank's current hawkish rate-hiking and QT cycle.
  In other words, the Fed should never go this time to the opposite extreme, by tightening the country's money supply growth too much in the coming quarters,
  (ii) try to increase the aggregate supply of the domestic macroeconomy as much as possible in the coming years.
  ---
  Market-distorting zero-lower-bound interest rate and QE policies should no longer be pursued by the US Fed in the future, despite the persistent greedy demand for them by the country's highly-virtualized financial markets, since those non-conventional monetary policies will mostly fail to increase reliably the productive real activities in the country's real economy, and hence can't much increase the country's aggregate supply or GDP to help fight the runaway real-economy inflation there.
  ---
  - vic lai Dec 4, 2022
    
    We can simply only study the US M2 Money supply YoY Growth chart for the past 3 years, to help more or less ascertain the coming economic performance of the US economy, and to help predict whether or approximately when a (deep) economic recession is going to unfold in the country in the near future.
    ---
    In February 2020, around the start of the pandemic in the US, the M2 YoY growth rate was 6.82%, which then kept rising quite quickly, until it reached the highest plateau of 26.73% in February 2021, and then followed by a more or less declining trend to become only 1.28% in October 2022.
    So, with a lag of around 1 to 2 years, both the economic performance and the domestic inflation rate of the country will follow more and less the same chart pattern.
    If the US's money supply growth remains at too-low a level for too long a period of time, for whatever reasons, and if domestic inflation is still rearing its ugly head then, the country will probably be facing the problem of stagflation one day in the future.
    ---
    - vic lai Dec 4, 2022
      
      Traditional economics textbooks keep arguing that the Fed's expansionary monetary policies, say in the form of rate-lowering cycle, will stimulate the domestic economy, and conversely, the Fed's contractionary monetary policies, say in the form of rate-hiking or QT cycle, will dampen the overheated domestic economy, as if the Fed were the cause, and the subsequent economic performance were the effect.
      Well, in practice, what's really been happening in the real world is usually or always the exact opposite.
      As is constantly being argued by Richard Werner, the horse of economic performance is actually always pulling the cart of the Fed's monetary policies forward, either quickly or slowly, but not the other way around ------ the cart can never pull the horse forward !
      ---
      So, the US's overheated economy in the past quarters, thanks to the country's too-fast money supply growth since the pandemic breakout, has forced the Fed to start and maintain her current contractionary rate-hiking and QT cycles in the country.
      Which also means, the Fed will be forced to pivot sometime in the future if the current declining trend of M2 growth rate sustains for too long a period of time.
      ---
      The above is consistent with Milton Friedman's Interest Rate Fallacy :
      (a) "As an empirical matter, low interest rates are a sign that monetary policy has been tight ------ in the sense that the quantity of money has grown slowly (think the secular stagnation since the GFC of 2008-09); high interest rates are a sign that monetary policy has been easy ------ in the sense that the quantity of money has grown rapidly (think the current runaway inflation in the US).
      The broadest facts of experience run in precisely the opposite direction from that which the financial community and academic economists have all generally taken for granted."
      (b) "After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead.
      Apparently, old fallacies never die."
      ---
      This common fallacy comes about because "almost everyone is thinking about and taking into account only the demand side ------ most people would love to borrow at low interest rates, so most people presume that low interest rates must mean that credit is both cheap and plentiful.
      However, not thinking about and taking into account the supply side of the picture, the banks and institutional investors who must make the decisions about who to lend to and at what interest rates, paints a misleading picture."
      ---
      During the secular-stagnationary years after the GFC of 2008-09 and before the pandemic breakout of 2020, the average demand for and the supply of bank credits had been quite low, because
      (i) the households and the corporations had been busy licking their wounds, by repairing their much damaged balance sheets, and had shied away from further borrowing from the banks, and
      (ii) there had been relatively few qualified borrowers with enough good collaterals for the commercial banks to willingly lend to,
      resulting in relatively low credit and money supply growth and hence also a low inflation environment in the domestic economy, despite the near-zero nominal policy interest rate persistently pursued by the QE-practicing Fed.
      Today, everything unwinds in the opposite direction, thanks to the Fed's bold MMT-like monetary experiment after the pandemic breakout in the country.
      ---
      - Colin Haller Dec 4, 2022
        
        Just stop with the vulgar Monetarism. Money creation is endogenous, central banks abandoned attempts to control the money supply 30 years ago, and there have been no “MMT experiments” anywhere because their only policy prescription is a Federal Job Guarantee which has never been attempted anywhere by anyone.
        
        vic lai Dec 5, 2022
        
        Was
        (i) the sudden and abnormal propping-up of the US money supply growth (here measured by M2, the broadest measure of money supply in the US), a result of both administration's stimulus-check-giving in the aftermath of the pandemic breakout in the country, and
        (ii) its current fast and relatively extended decline,
        probably a result of the fading out of (i) above,
        an endogenous or an exogenous money creation ?
        ---
        The new money so created of course went through the banks' checking accounts before they could be given to the receiving households and corporations, but were such new money applied for by the banks' "borrowers" and subsequently approved and created by the loan managers of the banks themselves through their usual loan-giving processes ?
        If you keep insisting such a helicopter drop of money, facilitated by the US Fed's 4th round of new-money-printing MMT-like QE, is still an endogenous money creation, then I've nothing more to say.
        ---
        Now I fully appreciate how Richard Dawkins truly felt when, in a TV documentary, he tried to convince a group of young British high-school students (who had obviously been always religiously guided by their devoted parents in their families) that people were created not by God but by the long process of biological evolution, but ultimately and seemingly to no avail.
        Such is the human nature.
        ---
        
        vic lai Dec 5, 2022
        
        It seems to me that the Fed's O/NRRP account (a savings account at the Fed's balance sheet, mostly for the US's money market funds) is now acting as a new automatic stabilizer in the country's monetary area, just like the federal government's taxes and expenditures which are always acting as the automatic stabilizers in the fiscal area.
        ---
        Near the end of September this year, the O/NRRP balance climbed to an all time high of US$ 2.426 trillion, and subsequently dropped slowly to US$2.058 trillion as of Dec 2, 2022.
        Before the end of September this year, the money increasingly stored at the O/NRRP account had helped to tame the inflation monster in the US.
        Conversely, starting from the end of September this year, the gradual decline of the O/NRRP balance at the Fed will also delay the arrival of the Godot-like economic recession in the US in the near future.
        ---
        If Godot really arrives in the US one day in the near future, he will probably be less "deadly" than in the bad old days.
        On the other hand, the inflation monster will be harder to tame this time.
        ---
        
        vic lai Dec 5, 2022
        
        At least some part of the O/NRRP savings currently sitting idly and unproductively at the Fed's balance sheet, earning handsome and risk-free interest revenues there, should gradually be transferred to the US federal government's TGA account at the Fed's same balance sheet, through the federal government's gradual issuance of say around 1 trillion dollars of new federal government treasury securities in the next few years, to
        (i) help finance part or all of the capital needed to set up a new USIEB proposed upstairs,
        (ii) prevent the idle funds at the O/NRRP account from suddenly escaping from the Fed's balance sheet and going out to the US real economy to bid up further the real-economy inflation of the country,
        (iii) help finance the US's expensive Inflation Reduction Act just passed by the US Congress,
        (iv) ......
        ---
        This kind of "direct finance" is non-new-money-printing, and so is non-inflationary in the near future, at least not before the USIEB starts creating new loans for her approved new infrastructure and new-energy projects in the US.
        Current rules governing the country's money market funds may need to be amended to further increase the scope of investment of those MMF funds.
        ---
        If recession starts to rear its ugly head in the country, funds at the Fed's TGA account can skilfully be released to the real-economy of the country to help fight the recession monster, without (much) empowering the inflation monster at the same time, if the released funds are
        (a) genuinely used in a productive manner to further increase the country's real-sector GDP,
        (b) no longer used to finance the country's unproductive consumer-spending, or to sustain the everything-asset bubble in the country's virtual economy.
        ---
        
        vic lai Dec 5, 2022
        
        (iv) The new funds at the Fed's TGA account provides the extra ammunition for Janet Yellen's Treasury to practise Treasury Buyback, to cope with the sudden liquidity shortfall in the US treasury market.
        The US Congress should suitably further relax the upper debt limit of the US Treasury.
        ---
        According to the estimates of Topsperity Securities, the excess
        Covid savings of the US households will be exhausted in November 2023, and so, by then, the US economy's biggest propelling engine, its total personal consumption expenditures, will fail to further push the domestic economy forward.
        ---
        This time is quite different, in the sense that the still-ample remaining Covid liquidity, or the US households' still relatively healthy overall balance sheets this time (which comes mainly from the further deteriorating of the US Treasury's balance sheet) will, ceteris paribus,
        (i) extend and reinforce the Fed's current hawkish rate-hiking (and QT) cycle,
        and hence
        (ii) deepen the inevitable economic recession in the country one day in the near future.
        ---
        But ceteris isn't paribus, because the extra TGA funds proposed upstairs, if boldly tried by Yellen's Treasury, can help to alleviate the seriousness of the coming recession or stagflation in the US.
        This time is again different, since today's Fed also needs the help of the US Treasury, and they need to work together to more easily exorcise the specter of stagflation.
        It always takes two to tango.
        ---
        
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