Prominent economist Nouriel Roubini predicted Monday the trajectory of the economy is either out-of-control inflation or a recession.
Roubini’s prediction is notable because he is one of the few economists who correctly predicted the housing bubble crash of 2007-2008. His correct analysis earned him the nickname of “Dr. Doom.”
What did Roubini say?
Speaking in an interview on Bloomberg Television, Roubini forecasted a “hard landing,” standard economist lingo for what precedes a recession triggered by attempts to control inflation.
“In the U.S., whenever you had inflation above 5% and unemployment below 5%, the Fed tightening has led to a hard landing,” Roubini said. “So my baseline is a hard landing.”
Roubini argued the Federal Reserve must take aggressive action with interest rates to achieve the central bank’s targeted inflation rate of 2%.
“The Fed funds rate should be going well above 4% — 4.5%–5% in my view — to really push inflation toward 2%,” he said.
“If that doesn’t happen, inflation expectations are going to get unhinged,” Roubini predicted. “Or if that happens, then we are going to have a hard landing. So either way, either you get a hard landing or you get inflation getting out of control.”
Unfortunately, Roubini explained the ingredients for a “stagflationary debt crisis” are plaguing the U.S. economy, which he said will result in a recession that is “long, protracted, severe, and associated with financial distress across the board.”
“We are still in a severely inflationary environment, not just in the United States but around the world,” Roubini said.
Roubini’s stark analysis comes less than a week after President Joe Biden celebrated “zero inflation.”
The truth is, the U.S. economy saw a 0% increase of inflation between June to July. But the U.S. economy is still experiencing woefully high year-over-year inflation of 8.5%, according to the latest consumer price index.