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Economist Who Predicted 2008 ‘Economic Crash’ Asks World to Prepare for Prolonged Bad Recession, Bitcoin and Ethereum Hard to Rebound

One observer who predicted a recession in 2008 and then again warned that the world economy is currently on its way to a major downturn.

Bank of America strategists even said, given the current recession fears, the economic downturn could last longer than initially thought.

Former US Treasury Secretary Larry Summers said the bearish potential could be worse than those who predicted a recession would only occur until the highest inflation subsided.

Other economists, namely a New York University professor and CEO of Roubini Macro Associates, Nouriel Roubini who is one of the experts who managed to predict the market crash in 2007 and 2008 ago also showed his attitude.

The man nicknamed dr. Doom said the recession may hit the US more severely by the end of this year, before finally spreading to the rest of the world in 2023.

“This is no ordinary, fleeting recession. it’s going to be severe, long, and rushed,” Roubini said in an interview with Bloomberg.

Debt Problem

To counteract rising US inflation, the Federal Reserve has implemented a series of aggressive interest rate hikes to put the brakes on the economy.

The aim is to engineer a soft landing for the economy, so that inflation returns to a 2% annual rate, without triggering a prolonged economic downturn or a significant rise in unemployment.

However, with current economic trends, according to Roubini, the Fed’s soft landing mission is impossible. He reasoned, this was due to the company’s rapidly increasing debt.

During the 2008 recession, Roubini said, there was a fatal mistake in handling consumer and corporate debt at the time. In fact, credit agencies and the federal government ignore it.

Both things, according to him, were repeated this year. The current trend created by rising interest rates does not bode well for rising levels of global debt accumulating after the COVID-19 pandemic.

The reason is that loan interest rates continue to increase and have the potential to create zombie companies, namely businesses that were formed during the easy credit era before and the beginning of the pandemic, but are now in danger of going bankrupt because they cannot generate profits or even pay their debts.

“Many zombie institutions, zombie households, corporations, banks, shadow banks, and zombie nations will die as interest rates continue to rise,” Roubini said.

“A long and bad recession will also destroy financial markets,” he continued.

He continued, the S&P 500, which last week submitted higher-than-expected inflation data, could fall 30% to 40%.

Worst Scenario

Despite the continued rate hikes, Roubini said U.S. inflation could last longer due to supply chain shocks disrupted as a result of the pandemic, the continuing consequences of the Ukraine war, and China’s zero-COVID policy that continues to slow economic activity.

Weak economic growth coupled with persistent inflation has the potential to be the worst-case scenario for the 1970s-style global stagflation. Roubini also warned that when the price of necessities rises, the economy will slow down.

Prior to Roubini, the World Bank had warned several times this year of a return to 1970s stagflation.

This is not the first time Roubini has expressed his opinion on ‘economic collapse’. In 2020, Roubini warned of the potential for a major US economic depression due to debt.

However, not all market watchers agree with Roubini’s view. Ark Invest CEO Cathie Wood said on Twitter last Tuesday that hawkish economists like Roubini could not afford to see a drop in inflation.

Impact On Crypto Market

Crypto Winter looks like it will last a long time. The moment of decline in the price of crypto assets may last longer, as it is difficult to predict a rebound in the near term due to the threat of recession and poor economic development.

Bitcoin is currently struggling to hold steady above US$20,000. However, in fact, since the beginning of 2022, BTC has lost about 60% of its value from its peak in 2021. Something similar happened to Ethereum, the second largest cryptocurrency which fell more than 70%.

The Washington Exaimer analyst said that investors’ hopes for the crypto market to rebound are difficult due to the trend conveyed by Dr. Doom above. In fact, the potential for a decline is more likely in the future.

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