Investment guru Nouriel Roubini warns “voodoo economics” is part of a “perfect storm” brewing that will plunge the U.S. into recession in 2020.
He also speculated that such an economic downturn could prompt President Donald Trump to start a war with Iran.
“It’s voodoo economics. Reagan tried it, Bush tried it... so you might have, by 2020, a perfect storm for the U.S. and the global economy,” the professor at NYU Stern School of Business recently warned Bloomberg Surveillance.
Voodoo economics is a controversial phrase used by George H. W. Bush in reference to President Ronald Reagan's economic policies, which came to be known as "Reaganomics."
The chairman of Roubini Macro Associates explained that the current surge in economic growth won’t last because an “unsustainable” fiscal stimulus will evolve into a "fiscal drag."
Roubini also echoed many of the same themes that appeared in a recent op-ed written for Project Syndicate with fellow economist Brunello Rosa.
Rosa and Roubini outlined 10 major factors that will fuel the next financial crisis, with one of the main factors being the rising inflation rate dictated by the Federal Reserve.
“Because the stimulus was poorly timed, the U.S. economy is now overheating, and inflation is rising above target. The U.S. Federal Reserve will thus continue to raise the federal funds rate from its current 2% to at least 3.5% by 2020, and that will likely push up short- and long-term interest rates as well as the U.S. dollar,” they wrote.
As a result, they fear Trump will launch a war to distract the public from the financial chaos.
“Since Trump has already started a trade war with China and wouldn’t dare attack nuclear-armed North Korea, his last best target would be Iran,” they wrote.
“By provoking a military confrontation with that country, he would trigger a stagflationary geopolitical shock not unlike the oil-price spikes of 1973, 1979 and 1990. Needless to say, that would make the oncoming global recession even more severe,” thet wrote.
Roubini is one of few economists who predicted the housing bubble crash of 2007-2008. He warned about the crisis in an IMF position paper in 2006. Roubini's predictions have earned him the nicknames "Dr. Doom" and "permabear."
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