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According to a well-known economist, a market crash is absolutely inevitable for a simple reason

Do Kwik
6. 4. 2023
4 min read

Dr. DOOM has been mentioned here a lot lately. This is mainly because he is one of the most vocal critics of the Fed's current actions. The situation is changing very dynamically and Roubini once again comes up with a new reason why we should expect problems.

ROubini thinks the Fed has lit the fuse

Who is Nouriel Roubini - Dr. DOOM?

Nouriel Roubini is an American economist and professor at New York University who became best known for his predictions of the 2008 global financial crisis. Roubini was born in 1958 in Istanbul, Turkey and grew up in Italy. He earned a PhD in economics from Harvard in 1982 and then worked as an economic adviser at the International Monetary Fund and as a professor at Yale.

In 2005, Roubini became known for his warnings about the impending global financial crisis and the 2008 market crash. His predictions were criticized by many economists, but ultimately proved accurate and Roubini became known as "Dr. Doom" for his pessimistic predictions for the global economy.

Roubini is also the founder and chairman of Roubini Global Economics, which provides analysis and forecasts of the global economy and financial markets. He is the author of several books and frequently appears in the media as a commentator on current economic events and trends. That's why so many investors look to his views, such as today's.

Detonator

One of the world's most respected economists believes that the banking crisis is far from over and that the US authorities are merely buying time by insisting that the banking system is sound. He argues that the financial system will not be able to handle the enormous amount of private and public debt that has already accumulated, and will create a fuse that will soon trigger the next phase of panic.

"We cannot achieve price stability, maintain economic growth and have financial stability at the same time, so eventually there will be an economic and financial crash."

The Fed is supposedly pretending that it is no big deal, but in reality it is carrying out a targeted liquidation of the banking sector. It is true that, on the face of it, this is true.

The Fed's moves to raise interest rates by four and three-quarters percentage points - which Roubini says means that banks' portfolios of long-term loans such as fixed-rate mortgages are now worth much less - should be heeded .

The Fed raised rates to some of the highest levels in 25 years. Source

After factoring in these risks, unrealized losses rise to $1.7 trillion, he said. That's crazy, considering that the combined equity of the entire banking system - in other words, its ability to absorb losses before bankruptcy - is only $2.1 trillion.

Worse than at any time in history

And there's another problem - far more debt than ever before.

"In the 1970s, when we had the stagflation shock that led to inflation and recession, debt levels in advanced economies were only around 100% of GDP - private and public debt. Today they are 420%," he said.

https://www.youtube.com/watch?v=FBgdSNUohkE

With little indication that consumer prices will return to the Fed's 2% target growth rate anytime soon, Roubini believes that neither the Fed nor the debt-laden federal government will have the leeway needed to sufficiently stimulate the economy.

"So we have the worst of the 1970s in terms of negative supply shock, reduced growth and inflation, and we have a debt level that is much higher than after the great financial crisis," Roubini said. "We are heading for a hard landing."

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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