Roubini warns there's a risk of a 'Greater
Depression' as coronavirus spreads
By Julia La
Coronavirus: ‘This idea we’re going to restart
everything soon ... is totally nuts’
March 26, 2020
coronavirus pandemic is pushing the U.S. toward
recession that’s increasingly at risk of morphing
into something far more serious, economist Nouriel
Roubini told Yahoo Finance on Tuesday, which he said
could easily become a “Greater Depression.”
COVID-19 infections worldwide
have pummeled financial markets and forced entire
economies to impose a lockdown on its citizens. The
turmoil is something Roubini — a famed market
observer who foresaw the 2008 crisis — predicted
would be more severe than the last recession.
“There will be
a Great Recession more severe than the global
financial crisis. That’s the consensus,” Roubini
told Yahoo Finance.
is — are we going to have a three-quarter severe
recession worse than ten years ago, and then by the
fourth quarter we have a recovery? Or, is it going
to get worse?” he asked.
“[The] idea of
reopening everything in a week, after two weeks,
doesn’t make any sense,” he added.
than a depression
explained that the downturn so far has been “far
worse even than the Great Depression,” noting that
the free-fall of output happened in a matter of
three weeks rather than years or even months.
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of a sharp ‘V-shaped’ recovery from the crisis,
Roubini said all the signs being transmitted by
the stock, credit and labor markets suggest
something far more bleak.
“It’s not a
'V.' It’s not a 'U.' It’s not an 'L.' It’s an 'I'.
It’s a straight line down,” he said.
now, we are on the verge of something that could be
worse than the great financial crisis, there are
conditions under which we could get into another
Greater Depression,” Roubini stated.
bright side, central banks are doing everything
necessary, or what he calls “kitchen sink” monetary
policy. The Federal Reserve’s move to buy a
virtually unlimited amount of bonds while
backstopping other key sectors has
surprised economists with its aggressiveness.
Roubini argued that fiscal policy is “behind the
curve.” A $2 trillion stimulus bill is bogged down
in Congress, amid political sparring between
Democrats and Republicans over its terms.
whether this package is passed, but we need similar
types of packages, not just in the United States,
but in Europe and other parts of the world,” Roubini
told Yahoo Finance.
“But I think
the key thing for this market and for the economy is
going to be to deal with this spread of the pandemic
because markets are not going to stabilize,” he
As the rate of
the virus’ spread increases, the likelihood of
reopening major economies looks dim.
activity is already worsening more than expected.
Therefore, the economy can still tank,” the
economist said. “The market can go lower after the
good news of today. And if that happens, and
contagion is not stopped, then we’ll have the
conditions for a depression, not a recession.”
Roubini, Professor of Economics at NYU Stern.
Julia La Roche
is a Correspondent at Yahoo Finance. Follow her on Twitter. -
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