Nuriel Roubini, a professor of economics at New York University and known as the "Doctor of Doom," warned in an article on Monday that rising inflation and current fiscal policies may trigger a "severe debt crisis."
Roubini wrote in the article that although the US government has formulated a trillion-dollar stimulus plan in response to the new crown pandemic, US inflation is rising and economic growth is slowing sharply. He warned: “Complicating the problem is that negative supply shocks in the medium term will reduce potential growth and increase production costs. Together, these supply and demand dynamics may lead to 1970s-style stagflation (increased inflation during recession), and ultimately It may even lead to a serious debt crisis." US President Biden and Treasury Secretary Yellen have repeatedly stated that rising inflation is a temporary result of sustained economic recovery. Fed Chairman Powell said in late July that inflation was “higher and more persistent”, but he still believes that inflationary pressures will eventually fall. But some economists and Republicans in Congress blamed the Biden administration’s economic policies for increasing inflation. Democrats in the Biden administration and Congress have proposed approximately $6 trillion in federal spending, which would bring U.S. spending to the highest level since World War II. Roubini said in an article published on Monday that this "optimistic view" of inflation may be wrong. He pointed out that the delta variant of the new crown virus is disrupting the global economy, and the quantitative easing measures proposed by the Federal Reserve "may lead to the collapse of bond, credit and stock markets." Roubini warned that the US economy may face a large number of "negative supply shocks" in the medium to long term. He wrote that these shocks, combined with "accommodative monetary and fiscal policies," may lead to continued stagflation and debt crises. Roubini concluded: "Although these continued negative supply shocks may reduce potential growth, the continued implementation of loose monetary and fiscal policies may trigger a de-anchor of inflation expectations. The resulting wage-price spiral will result in a higher than last century. A worse mid-term stagflation environment in the 1970s—the debt-to-GDP ratio was lower than it is now.