{"id":37872,"date":"2022-10-02T21:00:00","date_gmt":"2022-10-02T19:00:00","guid":{"rendered":"https:\/\/www.11onze.cat\/?p=37872"},"modified":"2022-10-03T12:44:14","modified_gmt":"2022-10-03T10:44:14","slug":"risk-long-ugly-recession","status":"publish","type":"post","link":"https:\/\/www.11onze.cat\/en\/magazine\/risk-long-ugly-recession\/","title":{"rendered":"The risk of a &#8220;long and ugly&#8221; recession"},"content":{"rendered":"<div class=\"component text\">\n  <div class=\"container\">\n\n\n    <div class=\"row\">\n      <div class=\"col  col-lg-8  offset-lg-2\">\n        <h3><b>Although former US Vice President Dick Cheney claimed that no one saw the great financial crisis of 2007-2008 coming, economist Nouriel Roubini warned in 2006 that we were heading for a deep recession. Now he foresees another &#8220;long and ugly&#8221; downturn, which could turn into the worst economic catastrophe of our lifetime if we do not take the right measures.<\/b><\/h3>\n<h3><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Recovering a 2% inflation rate without a hard landing for the economy is going to be &#8220;mission impossible&#8221;, according to economist Nouriel Roubini. He warns that <\/span><b>we are not facing &#8220;a short and shallow recession, it\u2019s going to be severe, long and ugly&#8221;<\/b><span style=\"font-weight: 400;\">, and could mean a plunge of up to 40% in stock prices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Roubini, who earned the nickname Dr Doom for predicting the bursting of the housing bubble and subsequent recession in the first decade of this century, has long warned of <\/span><b>high debt ratios for individuals, companies and governments<\/b><span style=\"font-weight: 400;\">, which would make a soft landing for the economy impossible.\u00a0<\/span><\/p>\n<p><b>As interest rates rise, he says, more and more households, companies, banks and zombie countries &#8220;are going to die&#8221;<\/b><span style=\"font-weight: 400;\">. In economics, the term &#8220;zombie&#8221; has become popular to refer mainly to institutions and companies that survive artificially by injecting loans, without which they would have to declare bankruptcy.<\/span><\/p>\n<h3><\/h3>\n<p>&nbsp;<\/p>\n<h3><b>The inevitable rise in interest rates\u00a0<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This economist took the 75 basis point hike <\/span><span style=\"font-weight: 400;\"><a href=\"https:\/\/www.federalreserve.gov\/monetarypolicy\/fomcpresconf20220921.htm\" target=\"_blank\" rel=\"noopener\">agreed<\/a> <\/span><span style=\"font-weight: 400;\">at the September meeting of the US Federal Reserve as a given. And he expects hikes of at least 50 basis points at the November and December meetings, which would put US interest rates at least between 4 % and 4.25 % by the end of the year. <\/span><b>If strong inflation persists, rates could go as high as 5 %<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At such interest rates, <\/span><b>more and more companies will be unable to finance themselves or to service loans already contracted<\/b><span style=\"font-weight: 400;\">. It will be the death knell for many companies that are currently facing significant increases in production costs, supply chain disruptions and a sharp decline in demand.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Indeed, <\/span><b>Dr. Doom identifies in the book <\/b><b>&#8216;<a href=\"https:\/\/www.littlebrown.com\/titles\/nouriel-roubini\/megathreats\/9780316284530\/\" target=\"_blank\" rel=\"noopener\">Megathreats<\/a>&#8216; <\/b><b>a number of threats to business and the economy today<\/b><span style=\"font-weight: 400;\">. These include an ageing population, protectionism, migration restrictions, relocation of factories from Asia to Europe and the US, US-China rivalry, climate change and recurring pandemics.\u00a0<\/span><\/p>\n<h3><\/h3>\n<p>&nbsp;<\/p>\n<h3><b>No room for manoeuvre<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In this context, Nouriel Roubini believes that <\/span><b>many countries will be unable to implement fiscal stimulus measures to counter the recession<\/b><span style=\"font-weight: 400;\">. On the one hand, the debt overhang means that many governments are \u201crunning out of fiscal bullets&#8221;. On the other hand, there is a risk that stimulus measures could overheat aggregate demand, which would be counterproductive for controlling inflation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In short, this professor of economics at New York University predicts that <\/span><b>between the end of 2022 and the end of 2023 the worst of the last two major crises will converge<\/b><span style=\"font-weight: 400;\">: we will have to face stagflation like the one experienced in the 1970s and suffer the consequences of massive debt defaults, as happened in the 2007-2008 crisis.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Just as in the last crisis mortgages and banks were the hardest hit, Roubini believes that in the recession that is upon us <\/span><b>the weakest link will be companies and shadow banking<\/b><span style=\"font-weight: 400;\">, which in many cases &#8220;are going to implode&#8221;. Faced with this possible business crisis, the economist recommends \u201cto be light on equities and have more cash&#8221;.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>If you want to discover the best option to protect your savings, enter <\/b><a href=\"https:\/\/serveis.11onze.cat\/en\/preciosos-11onze\" target=\"_blank\" rel=\"noopener\"><b>Preciosos 11Onze<\/b><\/a><b>. 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