{"id":267402,"date":"2023-04-09T07:47:46","date_gmt":"2023-04-09T07:47:46","guid":{"rendered":"https:\/\/www.thetruthseeker.co.uk\/?p=267402"},"modified":"2023-04-11T05:08:10","modified_gmt":"2023-04-11T05:08:10","slug":"renowned-economist-nouriel-roubini-trifecta-of-inflation-recession-and-banking-system-collapse-driving-america-into-a-doom-loop","status":"publish","type":"post","link":"https:\/\/www.thetruthseeker.co.uk\/?p=267402","title":{"rendered":"Renowned economist Nouriel Roubini: Trifecta of inflation, recession and banking system collapse driving America into a DOOM LOOP"},"content":{"rendered":"

Belle Carter \u2013 Natural News April 7, 2023<\/strong><\/h1>\n

An esteemed professor and economist pointed out that persistent inflation, the impending economic recession and an imminent insolvency crisis in the banking sector is leading the U.S. into a \u201cdoom loop.\u201d<\/a><\/p>\n

Nouriel Roubini, an erstwhile economic advisor to the Clinton administration, outlined his findings in a March 30 commentary<\/a> titled \u201cThe Coming Doom Loop.\u201d His piece published on Project Syndicate noted that to solve the decade-high inflation and provide liquidity support, \u201cthe only solution is a severe recession \u2013 and thus a broader debt crisis.\u201d<\/p>\n

\u201cA severe recession is the only thing that can temper price and wage inflation, but it will make the debt crisis more severe, and that in turn will feed back into an even deeper economic downturn,\u201d wrote Roubini. Given that throwing more money into the economy will not prevent this \u201csystemic doom loop,\u201d he urged everyone to prepare for the upcoming \u201cstag-flationary debt crisis<\/a>.\u201d<\/p>\n

Moreover, the economist blamed the \u201ccurrent regulatory regime\u201d allowing banks to treat securities and loans \u201cat their face value rather than their true market value\u201d for the impending collapse of the banking system. He noted that most U.S. banks are technically near insolvency, and that hundreds more are already fully insolvent. (Related:\u00a0The death of the Dollar is coming sooner than expected \u2013 when it happens expect bank runs and closures, food scarcity, riots, high unemployment, and hyper-inflation<\/a>.)<\/p>\n

Roubini also discussed the \u201cduration risk\u201d principle in his March 30 commentary. Under this principle, higher inflation leads to \u201chigher bond yields, which in turn would hurt stocks as the discount factor for dividends rose.\u201d At the same time, \u201chigher yields on \u2018safe\u2019 bonds would imply a fall in their price\u201d \u2013 owing to the inverse relationship between yields and bond prices.<\/p>\n

\u201cThis basic principle seems to have been lost on many bankers, fixed-income investors and bank regulators,\u201d he lamented.<\/p>\n

Inflation, rate hikes hit banks hard<\/strong><\/h2>\n

\u201cMaking matters worse, higher interest rates have reduced the market value of banks\u2019 other assets as well,\u201d Roubini continued.<\/p>\n

\u201cIf you make a 10-year bank loan when long-term interest rates are one percent and those rates then rise to 3.5 percent, the true value of that loan \u2013 what someone else in the market would pay you for it \u2013 will fall. Accounting for this implies that U.S. banks\u2019 unrealized losses actually amount to $1.75 trillion, or 80 percent of their capital.\u201d<\/p>\n

The economist ultimately concluded that central banks cannot \u201cfool\u201d themselves any longer by continuing to believe that rate hikes could curb inflation \u2013 while using liquidity support to maintain financial stability at the same time.<\/p>\n

The collapse of Silicon Valley Bank (SVB), Signature Bank and others caused depositors to become jittery. An initial surge of $129.3 billion in deposit outflows from all U.S. domestically chartered banks was recorded in the first week following SVB\u2019s failure. This has since slowed down to $84 billion.<\/p>\n

U.S. regulators believe that while the surge in withdrawals represents a stabilization in deposit outflows, there remains considerable uncertainty as to where things will go moving forward.<\/p>\n

\u201cWhat\u2019s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. That credit crunch \u2026 would then slow down the economy,\u201d said Federal Reserve Bank of Minneapolis President Neel Kashkari. \u201cThis is something we are monitoring very, very closely\u201d<\/p>\n

Mohamed El-Erian, another noted economist, also pointed out that ongoing deposit outflow from regional banks definitely spells trouble. He warned: \u201cThis could become a big issue for local communities, regions and sectors that fear that their access to loans will be curtailed because their traditional banking partners will have to shrink their balance sheets after losing deposits.\u201d<\/p>\n

EconomicRiot.com<\/a> has more stories about the economic collapse of the United States.<\/p>\n

Watch Nouriel Roubini warn about the American economy facing a \u201cperfect storm\u201d<\/a> on the Fox Business<\/em> program \u201cMaria Bartiromo\u2019s Wall Street.\u201d<\/p>\n