by Amy S.
Nouriel Roubini predicted the 2008 mortgage crisis meltdown, and in September of 2006 was laughed at to his face by an audience of economists from the International Monetary Fund. The same thing happened to Peter Schiff when he said the sub-prime market was going to be the catalyst of the 2008 recession.
New York University Stern Professor of Economics ,Nouriel Roubini discusses the stress on the economy caused by coronavirus. He explains why there will be a recession that will be severe and the need for fiscal stimulus. Roubini also says there will be a debt crisis and not just a liquidity crisis. I expect global equities to tank by 30 to 40 percent this year. My advice is: Put your money into cash and safe government bonds, like German bunds. They have negative rates, but so what! That just means that prices will rise and rise – you can make a lot of money that way. And if I am wrong and equities go up by 10 percent instead, that’s also OK. You have to hedge your money against a crash, that is more important.
That’s my motto: “Better safe than sorry!”. Roubini Explained. This Crisis Will Spill Over Into Disaster says Dr.Doom, Nouriel Roubini. He also Sees a 40% Collapse In this Delusional Stock Market. This Recession is worse than 2008; We are in Trouble. People are not going to have money to buy food once they lose their jobs,’ Roubini warns.
In an interview with German Magazine Der Speigel, Dr. Roubini – who correctly predicted the bursting of the U.S. housing bubble in addition to the 2008 financial crisis ; along with the ramifications of austerity measures for debt-laden Greece – believes that this pandemic will lead to a global economic disaster and that U.S. President Donald Trump will not be re-elected as a result. I have been saying all along, that the next financial crisis is not going to be like in 2008, that was household mortgages and leverage banks; but it’s going to be corporate debt and shadow banks.
Because the problems in The united states, the build-up of corporate debt . Leveraged loans , one trillion dollars of fallen angels in high grade, they’re going to be downgraded to below investment-grade. We are going to have a global recession. Many people are going to go bankrupt. Households; corporates; SMEs; and even some of the big highly leveraged players in energy, in Airlines, etc… The recession already started in this quarter given the data of the retail sales that came out today. So we’ll have a q1 contraction; an acutely q2 contraction;, and most likely a q3 contraction. This is going to be more severe than the global financial crisis because it’s front-loaded. It didn’t take a a year and a half for having the collapse of output. It didn’t take us to get Lehman.
The Private demand is collapsing; exports are collapsing; consumption is collapsing; residential investment is collapsing; CAPEX is collapsing; everything is collapsing . This is something we didn’t even see during the global financial crisis. This is not just problem with the stock market falling 30 percent. Yes, there will be a wealth effect.
The problem is in the credit market. We’re on the verge of a debt crisis. There has been so much issuance of debt in the last two years, especially that many companies are going to go bankrupt. This is going to be a debt crisis, not just a liquidity crisis. There has been a massive increase in the last decade of corporate debt. Corporate debt as a share of GDP as a share of corporate income as a share of any measure of the ability to pay has exploded, and is an all-time high.
Part of it was, of course, was firms borrowing to invest in capital spending. But we know that in the last few years, there has been a massive increase in share buybacks. Less profitable firms, junk firms have issued a huge amount of debt to do share buybacks. This was financial engineering that was boosting artificially earnings per share; that was boosting the value of these firms in the stock market artificially. This financial engineering was making these firms even more leveraged than they were before. That was a crazy, dangerous, and I would say a reckless form of financial engineering. and therefore those firms that were already highly leveraged, that used shared buybacks financed with debt ; are going to be now under severe stress.
Today 40% of American households based on the Fed numbers have less than $400 of liquid cash to deal with an emergency. These people are not going to even have money to buy food once they lose their jobs. The government should start giving every American a thousand dollars cheque. If we don’t do it, we are literally going to have riots in the streets. And people going to the supermarket and literally taking over everything and stealing it because people are going to start starving. It’s going to be more severe than the global financial crisis…we need fiscal stimulus: Roubini added.
This crisis is much more severe for China, and the rest of the world than investors have expected for four reasons. First, it is not an epidemic limited to China but a global pandemic. And Second, it is far from being over. This has massive consequences, but politicians don’t realize it. Everyone believes it’s going to be a V-shaped recession, but people don’t know what they are talking about. They prefer to believe in miracles. It’s simple math: If the Chinese economy were to shrink by 2 percent in the first quarter, it would require growth of 8 percent in the final three quarters to reach the 6 percent annual growth rate that everyone had expected before the virus broke out. If growth is only 6 percent from the second quarter onwards, which is a more realistic scenario, we would see the Chinese economy only growing by 2.5 to 4 percent for the entire year. This rate would essentially mean a recession for China and a shock to the world.
Everyone thinks that policymakers will react swiftly, but that’s also wrong. The markets are completely delusional. Look at fiscal policy: You can do fiscal stuff only in some countries like Germany because others like Italy don’t have any leeway. But even if you do something, the political process requires a great deal of talking and negotiating. It takes six to nine months, which is way too long.
The truth is: Europe would have needed fiscal stimulus even without the corona crisis. Italy was already on the verge of a recession, as was Germany. But German politicians aren’t even thinking about a stimulus, despite the country being so exposed to China. The political response is a joke – politicians are often behind the curve. This crisis will spill over and result in a disaster. The solution needs to be a medical one. Monetary and fiscal measures do not help when you have no food and water safety. If the shock leads to a global recession, then you have a financial crisis, because debt levels have gone up and the US housing market is experiencing a bubble just like in 2007. It hasn’t been a time bomb so far because we have been experiencing growth. That is over now. Trump will try to reap benefits from this crisis; that’s for sure.
But everything will change when the pandemic reaches the US. You can’t build a wall in the sky. Look, I live in New York City, and people there are hardly going to restaurants, cinemas or theaters, even before nobody there was infected by the virus. When the virus comes, we are totally fucked. And this is just the smoke. The real fire is on the way. The stock market has been highly inflated in recent years by QEs. It is high time that the bubble burst big time. The financial illusion has popped.
The crisis was inevitable. Take, for example American Airlines. Apparently, it has $34 billion in debt. I wonder how they’ll be able to service that debt when flights are canceled, and travel volumes halve ahead of the summer. The unprecedented Global Policy Easing Has Failed To Curtail Credit Carnage. A live and real-time national wealth transfer and Socialist restructuring, without a fireside chat or bank holiday, without consent, representation, or one revolt. Solves nothing. By what authority to steal and redistribute 90+ Trillion from the American Treasury, without consent or representation, to bailout the unelected Kleptocrat few, their Corporations and bribe the American People with our own unalienable Monetary Property.
Because of your willful and mathematically perfected, debt fiat deficit devaluation. Monetary Theory fraud has and remains, destroying the commonwealth and its People. We will not be liberated until every last debt fiat deficit devaluation. Monetary theory fraud; unelected Kleptocrat chrematistic few and their agents, who, with first use and consuming the cake twice, willfully created mathematical perfected wealth transfer and destruction of the unalienable Monetary Property of the American People, are removed and held accountable. Removed and held for high crimes and misdemeanors, never to be near our unalienable Monetary Property again. All civil rights and populist movements in the history of the country combined, has never accomplished what the recapturing of our unalienable Monetary Property of the American People would accomplish, for humankind. Non-negotiable.
This is not only a credit crisis. This is a defining moment in America. History shows that pandemics open the doors to revolutions, political destabilization, economic collapse, the war between countries, and erosion of human rights leading to Martial Law as a reactionary means of governments pushing back. Yes, it will all unfold very quickly, just like the sudden crash of the market and coming up with the closing and lockdown of Businesses, schools, and free movement. It’s all documented in similar events in the past. America is a spoiled, whiny country that the rest of the world holds in contempt. We are not sheltered from the suffering countless of people around the world endure on a daily basis. Recession at this point just means depression due to debt loads.
People who refuse what’s coming MUST unite together and organize themselves to live in self sustained community, that’s the only concrete viable alternative I see … We must focus on what UNITES us : the only power Big Brother has is the divide and rule strategy : distract people by making them over petty red-herrings . Harmony, cohesion and organization are the only way through …