Speaking at Semafor’s World Economy Summit on Wednesday, Roubini expressed concerns about the fragility of the banking sector, citing a multitude of factors that could lead to a severe financial crisis. Global debt levels, artificial intelligence-induced job losses, growing radicalism, wealth inequality, and escalating geopolitical tensions were just a few of the categories he listed.

In short, financial regulators may be trapped in a box.

“When inflation is too high, if you raise rates, you risk causing a hard landing,” he said, outlining the Fed’s dilemma. “Forget about jobs; if you don’t raise [rates] enough, then the risk is a de-anchor of inflation.”

Roubini particularly emphasized the risks of mounting debt levels in both developed and developing economies as well as in the private and public domains. He argued that massive debt accumulation, particularly by governments and corporations, has reached unsustainable levels and cannot be supported in an environment of higher interest rates.

According to the professor emeritus, combined public and private debt in advanced economies was roughly 100 percent of gross domestic product (GDP) in the 1970s. Today that number is 420 percent, he said.

An over-indebted economy means each subsequent rate hike by the Fed adds a greater financial burden on borrowers to make interest payments. However, inflation—which came in at 5 percent annually on Wednesday—continues to chip away at the income of lower and middle-class households.

On China, Roubini warned that the accelerated decoupling of the United States and China poses another financial stability risk, particularly in America.

“This Cold War between the U.S. and China is becoming colder by the day,” he said. “The Chinese realize, ‘if I owe you a billion is my problem for you, a trillion is my problem,’ and they want to diversify from dollar assets.”

Ultimately, he acknowledged that both nations face considerable challenges, with China facing a rapidly declining population and increasingly aggressive authoritarianism.

Article cross-posted from our premium news partners at The Epoch Times.

Nouriel Roubini, an erstwhile economic advisor to the Clinton administration, outlined his findings in a March 30 commentary titled “The Coming Doom Loop.” His piece published on Project Syndicate noted that to solve the decade-high inflation and provide liquidity support, “the only solution is a severe recession – and thus a broader debt crisis.”

“A 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,” wrote Roubini. Given that throwing more money into the economy will not prevent this “systemic doom loop,” he urged everyone to prepare for the upcoming “stag-flationary debt crisis.”

Moreover, the economist blamed the “current regulatory regime” allowing banks to treat securities and loans “at their face value rather than their true market value” 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: The death of the Dollar is coming sooner than expected – when it happens expect bank runs and closures, food scarcity, riots, high unemployment, and hyper-inflation.)

Roubini also discussed the “duration risk” principle in his March 30 commentary. Under this principle, higher inflation leads to “higher bond yields, which in turn would hurt stocks as the discount factor for dividends rose.” At the same time, “higher yields on ‘safe’ bonds would imply a fall in their price” – owing to the inverse relationship between yields and bond prices.

“This basic principle seems to have been lost on many bankers, fixed-income investors and bank regulators,” he lamented.

Inflation, rate hikes hit banks hard

“Making matters worse, higher interest rates have reduced the market value of banks’ other assets as well,” Roubini continued.

“If 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 – what someone else in the market would pay you for it – will fall. Accounting for this implies that U.S. banks’ unrealized losses actually amount to $1.75 trillion, or 80 percent of their capital.”

The economist ultimately concluded that central banks cannot “fool” themselves any longer by continuing to believe that rate hikes could curb inflation – while using liquidity support to maintain financial stability at the same time.

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’s failure. This has since slowed down to $84 billion.

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.

“What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. That credit crunch … would then slow down the economy,” said Federal Reserve Bank of Minneapolis President Neel Kashkari. “This is something we are monitoring very, very closely”

Mohamed El-Erian, another noted economist, also pointed out that ongoing deposit outflow from regional banks definitely spells trouble. He warned: “This 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.”

EconomicRiot.com has more stories about the economic collapse of the United States.

Watch Nouriel Roubini warn about the American economy facing a “perfect storm” on the Fox Business program “Maria Bartiromo’s Wall Street.”

This video is from the NewsClips channel on Brighteon.com.

More related stories:

• Top 25 US banks lose $89.7B after withdrawals surge following collapse of SVB and Signature Bank.
• IMF head warns: Risks to stability of global financial system have increased after recent upheavals across banking sector.
• Adapt 2030: David DuByne says America’s banking crisis is accelerating the rise of CBDCs – Brighteon.TV.
• Federal Reserve will keep increasing interest rates despite worsening banking crisis.

Sources include:

• TheEpochTimes.com 1
• Project-Syndicate.org
• TheEpochTimes.com 2
• Brighteon.com
• Natural News

#1 The IMF: “We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people”

#2 Bloomberg: “Economists say there is a 7-in-10 likelihood that the US economy will sink into a recession next year, slashing demand forecasts and trimming inflation projections in the wake of massive interest-rate hikes by the Federal Reserve.”

#3 The World Bank: “As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm, according to a comprehensive new study by the World Bank.”

#4 Bank of America CEO Brian Moynihan: “We’re going to have a shallow recession”

#5 Mohamed El-Erian: “Many ‘high-conviction’ U.S. recession calls are immediately coupled with the assertion that it’ll be ‘short and shallow.’ Reminds me of the behavioral trap ‘transitory inflation’ proponents fell into last year”

#6 Nouriel Roubini: “No, this is not going to be a short and shallow recession, it’s going to be deep and protracted”

#7 Larry Summers: “My sense is that it’s much harder than many people think to achieve a soft landing”

#8 Goldman Sachs CEO David Solomon: “Economic growth is slowing,” Goldman Sachs CEO David Solomon said at the same conference. “When I talk to our clients, they sound extremely cautious.”

#9 Charles Schwab & Co.’s Liz Ann Sonders: “We have to take our medicine still, meaning a weaker economy and a weaker labor market. The question is, is it better to take our medicine sooner or later?”

#10 BlackRock: “Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. They are deliberately causing recessions by overtightening policy to try to rein in inflation”

#11 Michael Burry: “Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It’s not hard.”

As you can see, there is a general consensus that things will be bad in 2023, but there is disagreement about just how deep the coming economic downturn will turn out to be.

If the worst of these forecasts turn out to be accurate, that will actually be incredibly good news.

Because the reality of what we will be facing in 2023 is likely to be significantly worse than any of these experts are currently projecting.

With each passing day, we continue to get even more numbers that indicate that big trouble is ahead.

For example, we just learned that luxury home sales absolutely cratered during the months of September, October and November…

Sales of luxury homes fell 38.1% year over year during the three months ending November 30, 2022, the biggest decline on record, according to a new report from Redfin, a technology-powered real estate brokerage. That outpaced the record 31.4% decline in sales of non-luxury homes. Redfin’s data goes back to 2012.

The luxury market and the overall housing market lost momentum in 2022 due to many of the same factors: inflation, relatively high interest rates, a sagging stock market and recession fears.

We haven’t seen anything like this since 2008.

And we all remember what the housing crash of 2008 ultimately did to the financial markets.

Normally, the beginning of a calendar year is a time for optimism.  As we look forward to a completely clean slate, it can be easy to forget the difficulties of the previous 12 months.

But this year things seem completely different. On some level, just about everyone can feel that very challenging times are ahead of us.

Decades of very foolish decisions are starting to catch up with us in a major way. Our leaders tried very hard to keep the party going for as long as possible, and to a certain extent they were quite successful in doing so.

Our politicians in Washington kept borrowing and spending trillions upon trillions of dollars that we did not have, and that definitely delayed our day of reckoning.

And the Federal Reserve kept the financial markets artificially propped up for years by endlessly pumping giant mountains of fresh cash into the system. But such foolish measures only made our long-term problems even worse, and now our leaders are losing control.

All of the “mega-bubbles” are starting to burst, and the system is beginning to fall apart all around us. It is time to turn out the lights, because the party is over.

We all had a lot of fun while it lasted, but now the bill is due and an extraordinary amount of pain is ahead.

***It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael and my brand new book entitled “End Times” is now available on Amazon.com.  In addition to my new book I have written six other books that are available on Amazon.com including “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. (#CommissionsEarned)  When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending copies as gifts to family and friends.  Time is short, and I need help getting these warnings into the hands of as many people as possible.

I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.

I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is definitely a great help.  These are such troubled times, and people need hope.  John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.”  If you have not already done so, I strongly urge you to invite Jesus Christ to be your Lord and Savior today.

Article cross-posted from The Economic Collapse Blog.