Brace For Global Recession By 2020 - Nouriel Roubini
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(Kitco News) – A global recession is coming as early as next year as risks have intensified, according to one financial expert.
In a commentary for Project Syndicate, Nouriel Roubini, chief executive officer of Roubini Macro Associates, warned that “the risk of a global recession and crisis in an already fragile economy is rising.”
The reasons for the potential recession, he said, mainly involve the delicate state of U.S. foreign affairs and the imminent threat of stagflation – the combination of rising inflation and slow growth.
Roubini previously served in the White House’s Council of Economic Advisers during the Clinton Administration. Last month, he warned of the consequences of a “mismanaged” relationship between the U.S. and China. Now, he said, the uncertainty is beginning to materialize, with the ongoing escalation of tensions between the U.S. and China concerning trade and technology substantially adding to the likelihood of a global recession.
“While trade wars and potential oil spikes constitute a supply-side risk, they also threaten aggregate demand and thus consumption growth, because tariffs and higher fuel prices reduce disposable income,” he said. “With so much uncertainty, companies will likely opt to reduce capital spending and investment.”
Roubini said it is becoming increasingly likely that the Fed, as well as other major central banks, will cut rates in response to the impending economic crisis.
However, central-bank policy changes will not be enough to hinder a global recession, he said, as was the case with the “Great Recession” of 2009.
“Under such a scenario, the shock to markets around the world would be sufficient to bring on a global crisis, regardless of what the major central banks do,” Roubini noted. “With the current tensions already denting business, consumer, and investor confidence and slowing global growth, further escalation would tip the world into a recession.”
Growing fears in the marketplace surrounding an impending recession have boosted gold prices, just down from 14-month highs on Monday morning. Comex August gold futures last traded at $1,344.7 an ounce.