Nouriel Roubini: the 10 ‘mega-threats’ that surround humanity, according to one of the economists who predicted the 2008 crisis

Economist Nouriel Roubini has been nicknamed “Dr. End of the World” for predicting the 2008 financial crisis and for his pessimistic warnings about the future of humanity.

In his most recent book, megathreats (“Mega-threats”, literally translated), he identifies the main dangers that, in his opinion, lurks our species.

In its list of 10 threats, low economic growth and inflation, debt and climate change stand out.

Although he is sometimes criticized for his catastrophism, Roubini, who was born in Istanbul, Turkey, also proposes solutions.

He gained fame for predicting the 2008 financial crisis, one of the worst in recent history — two years before it happened, the economist warned of the imminence of the subprime mortgage crisis at an IMF (International Monetary Fund) conference.

More recently, Roubini, who is a professor at New York University in the US, issued a new warning.

He warned that bitcoin was “overvalued” and likened it to a “cesspool”, an omen that was confirmed when the price of this and other major cryptocurrencies plummeted.

James Menendez, presenter of the BBC’s Newshour program, interviewed him.

The world following World War II has been one of relative peace, increased incomes and health for much of the world. Is this about to end?

I think so. There are new threats that did not exist in the decades between the 1960s and 1980s. At that time, no one worried about a possible nuclear war between superpowers, amid the polarization between the United States and the Soviet Union.

Nobody talked about climate change either, and after the great pandemic of 1918, there was not another great one until the 1980s.

We had no idea that artificial intelligence, robotics and automation would replace most jobs, and we had stable democracies, not the left and right populisms that are coming to power now.

And the commitments that come with aging, for which there’s no funding, like pensions and healthcare, didn’t exist, because we still had a young and growing population.

So the world today is very different from what it was between 1945 and the mid-1980s. There are new threats that are mega-threats and can destroy not just the global economy, but the world at large.

I’m going to ask about one of them, global debt. Why do you think it can radically change the world economy?

In the 1970s, the ratio of public and private debt to GDP was around 100%, and now in advanced economies it is at 420% and rising. This ratio was high, but the cost of this debt was low until recently, thanks to zero or negative interest rates and expansionary policies. Even “zombie” families, businesses and corporations, even “zombie” governments, managed to survive because interest rates were so low.

(In economic vocabulary, “zombies” are companies characterized by a tendency to not make enough profit to get rid of the burden of obligations, but still have sufficient access to credit to roll over debt.)

Interest rates are now high and rising because we have to fight inflation, and look what’s happening with mortgage debt in the UK, or consumer debt, or corporate debt that is now on the brink of crisis. The fiscal stimulus nearly led to a fiscal crisis in recent weeks.

Roubini’s 10 mega-threats

Roubini’s book features ten “mega-threats,” which he addresses in each of the publication’s chapters. Are they:

• The mother of all debt crises;
• Public and private failures;
• The demographic time bomb;
• The Easy Money Trap and the End of the Boom;
• The Great stagflation that is coming;
• Currency collapse and financial instability;
• The end of globalization;
• The threat of artificial intelligence;
• The new cold war;
• An uninhabitable planet.

What does all this mean for people around the world? Will we be poorer in the coming decades?

If we are going to have debt that is not sustainable, we only have a few options left. Or we go bankrupt and go into receivership; or, as I hope, governments will use unexpected spurts of inflation to reduce the real value of nominal debt.

I think central banks are going to give in and not act, because when governments can’t reduce government debt or taxes because there’s a big deficit and wars against climate change or against pandemics or against other countries, we borrow too much and end up inflating the wave, as it did in the 1970s.

You talk about climate change in an advanced part of your book. Is this the biggest threat we humans face?

It’s the tenth threat on my list, but in some ways it’s very important. But it is a slow-moving threat, while stagflation is a very short-term risk, as is the risk of financial collapse or that what is happening between Russia and Ukraine turns into a confrontation with NATO. North, Western military alliance) or an unconventional war with Iran on one side and the US and Israel on the other, or between the US and China over Taiwan.

Climate change will destroy us, but although the damage it causes today is serious, like droughts in the United States, Asia or Central America, and food prices have soared because of it, it will destroy us for decades to come. . It is a slower moving threat compared to others.

Do you think governments around the world are up to the challenge?

Not. Both democratic and authoritarian countries avoid facing the future, burying their heads in the sand like ostriches. Leaders don’t make tough decisions because they want to be re-elected. Authoritarians also need support.

When it comes to climate change, there is a lot of talk about socially responsible investing in the business world and the financial sector, but there is actually a lot more talk than action. Because neither public nor private actors want to make the immediate sacrifices that the future demands. That is why there is political paralysis.

A few years ago, you were nicknamed “Dr. End of the World.” How do you get up every day, considering you see the future as bleak?

I’m a realist, not a catastrophist. At the end of each chapter of my book, I suggest a solution for each mega-threat and propose two scenarios, a dystopian one in which we do nothing and these threats destroy the world, and a less dystopian and more utopian one in which they apply to everyone. levels, also individual, policies that lead us on a better path.

I hope we’re in the right direction, but right now I’m afraid there’s no incentive to do the right thing. That’s what i do. Trying to change the world for the better.

– This text was originally published in https://www.bbc.com/portuguese/internacional-6340485