Nouriel Roubini says markets should brace for a meltdown as stressors lead to a 'doom loop' in the economy
That disaster is largely coming as a result of three economic stressors the US is facing: high inflation, high debt levels, and financial instability.
But the solutions to those issues are at odds. Central bankers will need to lower interest rates to ease rising debt burdens, but at the same time, need to raise interest rates to fight inflation. That's been further complicated by thelast month, which has created even more pressure for Federal Reserve to dial back interest rates, in order to stabilize the financial system.
The result is a"trilemma" that leaves the Fed at an impasse, Roubini said. He predicted Fed officials will eventually"" on raising interest rates, and that will cause runaway inflation, debt problems, and financial instability across the economy. While certainly on the more bearish end of the spectrum, parts of Roubini's outlook have been echoed by other market commentators, who say the Fed's monetary policy is a tough balancing act and a recession is on the horizon.
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