World Economic Forum - Since the financial crisis of 2008, the world has been drifting towards a perfect storm of financial, political, socioeconomic, and environmental risks, writes Nouriel Roubini.
- From massive increases in fiscal deficits as high as 10% of GDP or more, to worsening relations between China and the US, here are 10 economic factors pointing to financial trouble ahead, according to the economist.
After the 2007-09 financial crisis, the imbalances and risks pervading the global economy were exacerbated by policy mistakes. So, rather than address the structural problems that the financial collapse and ensuing recession revealed, governments mostly kicked the can down the road, creating major downside risks that made another crisis inevitable. And now that it has arrived, the risks are growing even more acute. Unfortunately, even if the Greater Recession leads to a lackluster U-shaped recovery this year, an L-shaped âGreater Depressionâ will follow later in this decade, owing to ten ominous and risky trends.
The first trend concerns deficits and their corollary risks: debts and defaults. The policy response to the COVID-19 crisis entails a massive increase in fiscal deficits â on the order of 10% of GDP or more â at a time when public debt levels in many countries were already high, if not unsustainable.
