Contrary to the widespread consensus that predicts a shallow recession in 2023, accompanied by rising equity prices and falling bond yields, Turkish-American economist Nouriel Roubini expects inflation to persist alongside an economic slowdown.
Central Banks Trapped by High Levels of Global Debt
Roubini says that the economic slowdown caused by repercussions of Covid-19 shutdowns, the impact of the Ukraine-Russia war on oil and natural gas prices, and China’s zero Covid policy have all contributed to rising inflation. These three factors weakened supply, even as demand increased.
“The combination of all of these things leads to a rising cost of production and a contraction of economic activity. That’s what we call a recession,” the economist asserted in a recent Kitco NEWS interview .
Despite efforts by central banks to curb inflation, Roubini argues that rising interest rates will cause an economic crisis unless the amount of global debt is reduced.
“So we’re entering recession by tightening monetary and credit policy, making the recession worse, while raising the debt servicing ratios of the private and public sector with higher interest rates,” he warned.
Gold bug and Bitcoin critic Peter Schiff agrees.
“Eventually, interest is the only thing you’re going to be spending money on,” Schiff told the Epoch Times in a recent interview. Schiff also points out rising rates have done nothing to nudge consumers towards saving more and spending less.
Real estate consultant Nick Gerli confirms that the savings rate of Americans has dropped to its lowest levels since 2006-2007, just before the 2008 financial crisis.
The Savings Rate just collapsed down to 2.2%, the lowest level ever.