“Even if the Federal Reserve keeps interest rates on hold for longer, a ‘no landing’ scenario, in which the U.S. economy continues to grow without stagnation, could force the Fed to raise rates further next year.”
Nouriel Roubini, 66, the renowned New York University professor of economics also known as “Dr. Doom” for his gloomy outlook on the global economy, warned that “the U.S. standalone economic boom could have adverse effects on the global economy” in a recent video interview with the Chosunilbo. Roubini will attend the 15th Asian Leadership Conference, the ALC, hosted by the Chosunilbo on May 22-23 at the Shilla Hotel in Seoul, South Korea.
The Turkish-born Iranian-American economist received his undergraduate degree from Bocconi University in Milan, Italy, and his Ph.D. in Economics from Harvard University in 1988. He has since worked as an economist at the Federal Reserve, the U.S. Treasury, the International Monetary Fund and the World Bank. Roubini also served as a senior economist in the Council of Economic Advisers during the Bill Clinton administration 1998.
Roubini predicted that if interest rates stay higher for longer in the U.S., the global economy could suffer from its consequences. “If the Fed raises rates next year, many countries will inevitably have to maintain high interest rates for an extended period [to defend their economies], and countries with high levels of national debt will suffer,” he said. He added that a stronger dollar will make it harder for these heavily indebted countries to fight inflation as it pushes import prices up.
Roubini also noted that while inflation rates in major economies recently fell to 3% from the previous 7-9%, reaching the Fed’s 2% target could take longer than anticipated because U.S. economic growth will likely remain brisk this year.
“The prolonged U.S. economic boom could be problematic as it widens the economic gap between the U.S. and other advanced economies,” he said. But he pointed out that “it also presents a complex situation that could benefit the Korean economy.”
“Robust domestic demand in the U.S. means that export-driven economies like Korea have the opportunity to grow faster,” he said. “One of the reasons Korea’s economic growth in the first quarter, at 1.3%, exceeded expectations was a strong increase in exports.”
Roubini rose to prominence after predicting the 2008 global financial crisis. He warned that “the U.S. is likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence, and, ultimately, a deep recession” at an IMF speech in 2006. His predictions were met with skepticism then, but when the global financial crisis took the world by storm almost exactly as he had forecasted, he emerged as a “pessimist sage.” He earned the nickname Dr. Doom, and his books, including “Crisis Economics” and “Megathreats,” garnered global attention.
“I consider myself as Dr. Realist rather than Dr. Doom because I do not just warn about risks - I also propose realistic policies and solutions from a balanced perspective,” he said.
“South Korea is a strong liberal democracy with star players in the semiconductor sector, competitive automakers, and a highly skilled workforce,” Roubini said. “But Korea has to deal with an aging population, low birth rates, and the economic inequality felt by many, which could lead to social instability.”
He advised Korea to prepare for the risks posed by the intensifying geopolitical tensions between the U.S. and China. “The challenge for South Korea will be how to de-risk its strong economic ties with China if the U.S.-China conflict escalates,” he said.
