'Doctor Doom' Rubini Warns of Global Economy Stagflation for 10 Years

Professor Nouriel Roubini of New York University.

Professor Nouriel Roubini of New York University, known as "Dr. Doom" for predicting the 2008 global financial crisis, warned that the global economy will experience stagflation (economic stagnation accompanied by rising prices) over the next decade, causing significant losses for both stock and bond investors.

On the 27th (local time), Professor Roubini told Business Insider, "The world’s major markets will face an 'era of supermassive threats' where stagflation acts as a headwind."

He expects that due to stagflation, inflation will average 5% instead of the Federal Reserve’s 2% target, meaning long-term bond yields would need to reach 7.5% to achieve a real return of about 2.5%. Currently, the yield on the 10-year U.S. Treasury bond is around 4.5% (4.385% on the 28th). If it rises to 7.5% under this scenario, bond prices could plunge by approximately 30%. As a result, "losses for both bond and stock investors worldwide could grow into the tens of trillions of dollars over the next decade," he warned. He cited reasons for expecting stronger inflation ahead, including an aging workforce, deglobalization, increased government spending due to wars and climate adaptation, among others.

Professor Roubini predicted that such strong inflation would trigger a "debt trap" scenario for central banks, causing a sharp rise in debt for both the private sector and governments, worsening the situation. Attempts to lower inflation through interest rate hikes could risk triggering a recession.

He added that, as evidenced by central banks currently halting rate hikes despite persistently high core inflation, inflation targets could rise above historical averages.

Regarding this, Business Insider reported that other analysts also warned that unless debt ratios are reduced, increased public borrowing and spending will eventually lead to defaults. Professor Roubini reiterated that some central banks are tolerating high inflation levels as part of efforts to reduce nominal debt.