Roubini says expectations of a shallow recession are delusional

Speaking to Bloomberg TV, Economist Nouriel Roubini said that the US is approaching a deep recession with high interest rates and the economy is saddled with a heavy debt burden. The expert went so far as to even say that all those who expect a shallow recession are “delusional.”

He defended this by saying, “There are many reasons that contribute to the fact that we are experiencing a serious recession and a serious crisis in public and financial debt. The idea that this will be short-lived and shallow is completely delusional.”

Among the reasons given, the financial analyst highlights the public debt ratio at historically high levels in the wake of the pandemic and the burden on advanced economies that he says continues to grow.

The economist added that aspects that differ from what happened in the seventies, when the debt ratio remained low despite the so-called stagflation, which occurs when there is a simultaneous stagnation in the economy and a high rate of inflation. But he added that the country’s debt has risen since the 2008 financial crisis.

He stressed that “in previous recessions, like the last two recessions, we had monetary and fiscal easing. This time we will enter a recession by tightening monetary policy.”

Recession fears are mounting as the US Federal Reserve (Fed) tightens monetary policy to fight inflation, which has reached its highest levels in four decades. However, the head of the monetary authority, Jerome Powell, defended that not confronting the rise in prices would be a “bigger mistake”.

The two-day meeting of the Federal Reserve, which began this Tuesday, is expected to lead to another increase in interest rates, this time by 75 basis points.