Economist Nouriel Roubini predicts a “deadly depression” will hit the global economy in the middle of the decade.
The author and New York University economist told BNN Bloomberg recently that the most likely economic scenario in the wake of the COVID-19 pandemic "is that of a "U-shaped recovery."
However, Roubini, who predicted the 2008 financial crisis, warns "there is also a risk of an L, what I call a greater depression, that's my baseline for the rest of the decade, but not this year."
He said that as a result of the COVID-19 pandemic, both households and corporations will have to spend less and save more, causing a global investment slump and a global savings glut.
"That's a recipe for a very anemic recovery of the U.S., Canada, of the global economy," he said.
He doesn’t see much that global leaders can do to stop inevitable economic disaster.
"Unfortunately, I fear there are some major trends — what I call the 10 deadly Ds — that are going lead us to a deadly depression sometime later in this decade. Only a matter of when – not whether," he said.
Roubini's deadly Ds include debt, deficits, deglobalization, currency devaluation, and disruption in the environment — all of which he argues will push the global economy into a depression, Bloomberg explained.
Despite seemingly endless monetary and fiscal stimulus, "the train wreck is a slow moving one," he said.
"Policies cannot do much about it. They will actually exacerbate the debt imbalances" as "rising debt levels will explode," he said.
He also scoffed at a common recovery scenario.
"The U.S. stock market is pricing in a V-shaped recovery, but I think it's delusional," he said.
For his part, Federal Reserve Chair Jerome Powell recently sketched out an altogether bumpier ride for the U.S. economy than many are predicting - one that sees business activity stop and start for months to come, until an effective treatment or vaccine for the novel coronavirus can be found.
Since the novel coronavirus outbreak in the United States, economic growth stalled almost overnight as "stay at home" orders shut down large parts of the economy. Economists and Trump administration officials have been divided about how deep and long-lasting the economic impact will be,
Reuters explained.
Life in the United States could return to "normal" by June, White House senior adviser Jared Kushner said last week, adding that "the hope is that by July the country’s really rocking again."
Others predict a "U shape," where it takes longer to bounce back. The idea of a "W-shaped" recovery has also steadily gained traction as health experts increasingly warn about a resurgence in virus cases come the fall, and with it, a new downturn in economic growth.
Just under half of 45 economists responding to a Reuters poll earlier this month said the U.S. economic recovery would be "U" shaped. Ten of those polled said it would be V shaped, and five said it would be "W" shaped. The poll was conducted before the price of a barrel of U.S. crude oil fell below zero.
Meanwhile, global funds recommended an increase in bond holdings to the highest level in seven years, at the expense of stocks, and said the recovery in the coronavirus-hit world economy will be U-shaped, a Reuters poll showed.
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