Market MovesJuly 3, 2019

Dr. Doom Forecasts a Recession in 2020

Economist Nouriel Roubini sees a continued trade war and spiking oil prices as the catalysts.

Reported by Larry Light

“I never make predictions,” baseball great and all-around sage Yogi Berra once said, “especially about the future.”

But Nouriel Roubini is not so shy. The economist, who famously predicted the real estate bubble’s popping and the financial crisis that devastated the banking system, sees another recession on the way. And, he believes, it will hit next year.

“It’s a scary time for the global economy,” said Roubini, in a Bloomberg TV appearance. The head of his own consultancy, Roubini Macro Associates, and a New York University professor, he has earned the sobriquet “Dr. Doom.”

In his view, a nasty combo of a continued US-China trade war and spiraling oil prices will push the economy over the brink. High debt levels will make matters worse, he indicated. And beyond all that, he said, the Federal Reserve has fewer recession-combating weapons, since it can’t lower already-low interest rates much more to make a difference.

Right now, Washington and Beijing are headed back to the bargaining table, after a friendly tête-à-tête between President Donald Trump and Chinese leader Xi Jinping at the G-20 meeting in Japan last weekend. But Roubini isn’t buying their comity.

To him, the bilateral talks are slated to collapse, and then a new Cold War will commence, with nations forced to choose sides between the world’s two superpowers. Harking back to how the World War II alliance between the Americans and the Russians dissolved, he said, “This divorce is going to get ugly, compared to the divorce between the US and the Soviet Union.”

Then there’s oil, which helped bring the 1970s stagflation, a sour situation that he expects to make a return. The standoff between the US and Iran could well lead to an oil-price surge that will blast economic growth to pieces, he warned.

Certainly, the predictions of economic savants hardly always come true. Roubini’s peers a decade ago thought the sub-prime mortgage problem could be contained. Today, the International Monetary Fund (IMF) has been a fount of optimism about the world economy, only to see it slow.