American economist Nouriel Roubini called ten "mega-threats" to humanityGlobal warming, war and inflation — it seems that the world is gripped by crises.
In an interview with Der Spiegel, American economist Nouriel Roubini, who predicted the global financial crisis, named ten urgent "mega-threats" and gave them an assessment.
Der Spiegel: Professor Roubini, would you like your nickname "Doctor Rock" to be changed to "Doctor Realist". But in the new book you describe "ten mega-threats" that call into question our future. It's a bit gloomy, you'll agree.Nouriel Roubini: The threats I am writing about are real, no one will deny it.
I grew up in Italy in the 60s and 70s. I didn't worry about the war between the great powers and the nuclear winter, because the USSR and the West were in a state of detente. I have never heard the phrases "climate change" or "global pandemic". And no one was worried that robots would displace people from their jobs. We had freer trade and globalization, we lived in stable democracies, even if not perfect. The national debt was lower, the population was younger, the pension and medical systems had no unsecured obligations. This is the world I grew up in. And now I have to worry about everything at once—and not just me.
– Is it so? Or do you feel like a voice crying out in the desert?– I was in Washington for an IMF meeting.
Economic historian Niall Ferguson said in his speech that we will be lucky to face an economic crisis like the one that took place in the 70s, and not a war like in the 40s. National Security advisers are concerned about NATO's entry into the Russian-Ukrainian conflict and the collision course that Iran and Israel are taking. And this morning I read that the Biden administration is expecting an imminent Chinese attack on Taiwan. Objectively, the Third World War has already actually begun, in particular, it concerns Ukraine and cyberspace.
– Politicians seem to be shocked by the "synchronicity" of the current major crises. How should priorities be set?– Of course, first it is necessary to resolve the issue with Russia and Ukraine, and only then with Iran, Israel and China.
But it is also impossible to forget about inflation and recessions, that is, about stagflation. The eurozone is already suffering from a recession, and I see it as long and unpleasant. In the United Kingdom, the situation is even worse. The pandemic seems to have been contained, but new COVID strains may soon appear. And climate change is a slow—motion disaster, and it's gaining momentum. For each of the ten threats described in my book, I can give 10 examples, and they are relevant, not long-term. Would you like to list those that relate to global warming?
– Come on.
– There have been cases of drought all over the world this summer, including in the United States. Not far from Las Vegas, it is so strong that the bodies of 1950s gangsters float up in dried-up lakes. In California, farmers are selling water rights because it has become unprofitable to grow crops. And in Florida, insurance of houses on the coast is not available. As a result, half of Americans will have to move to the Midwest or Canada. No speculation, pure science.
– Another threat that you describe is US pressure on Europe to limit business relations with China and not endanger the US military presence on the continent. How likely is this scenario?– It is already being implemented.
The US recently banned the export of semiconductors to Chinese companies for artificial intelligence, quantum computing and military purposes. The Europeans will want to continue doing business with the United States and China, but for national security reasons this will be impossible. Trade, finance, technology, the Internet – everything will be divided in two.
– There are disputes in Germany about whether to sell parts of the port of Hamburg to the Chinese state-owned company Cosco. What do you recommend?– We need to analyze the purpose of this transaction.
Germany has already made a big mistake by becoming dependent on Russian energy carriers. China, of course, will not seize German ports by military means, as it could do in Asia and Africa. But the only economic argument in favor of such an agreement is the possibility of retaliating as soon as European factories are seized in China. Otherwise, the idea is so-so.
– You say that Russia and China are trying to create an alternative to the dollar and the SWIFT system. But it's not coming out yet.– It's not just about payment systems.
China sells cheap 5G technologies all over the world that can be used for espionage. I asked the president of an African country why he buys them in China and not in the West. He replied, they say, we are a small country, and someone will still spy on us, so why not use Chinese technology, it is cheaper. China is building economic, financial and trade power in many parts of the world.
– Will the Chinese yuan really replace the dollar in the long run?– It will take time, but the Chinese know how to plan ahead.
They suggested that the Saudis set prices and charge for the oil they sell them in yuan. Their payment systems are more complex than any other in the world. A billion Chinese people use Alipay and WeChat pay every day to make transactions. In Parisian Louis Vuitton boutiques, you can already make purchases with the help of the latter.
– In the 70s, we also had an energy crisis, high inflation and stagnation - the so—called stagflation. Is something like this happening now?– Today the situation is even worse.
Then we didn't have a huge public and private debt, as we do today. If central banks raise interest rates to counteract inflation, many zombie companies, shadow banks and government institutions will go bankrupt. That oil crisis was caused by only a few geopolitical shocks, and today there are more of them. Just imagine the consequences of China's attack on Taiwan, which produces 50% of all semiconductors in the world and 80% of high-quality. This will be a global shock. Today we depend more on semiconductors than on oil.
– You are very critical of central banks and their weak monetary policy. Is there at least one of them who does everything right?"They're all disgusting.
Either they are fighting inflation through high interest rates, causing a sharp decline in economic indicators for the real economy and financial markets, or they are cowardly and give up without raising rates, and inflation continues to rise. I think the second option, following the Bank of England, threatens the Fed and the ECB.
– On the other hand, high inflation rates can benefit by absorbing the national debt.– Yes, but at the same time the cost of new debts increases.
When inflation rises, lenders charge higher interest. Here is an example: if inflation rises from 2% to 6%, then the rates on US government bonds will have to rise from 4% to 8% to continue to bring the same yield; and the cost of private loans on mortgages and business loans will be even higher. It will cost a lot more for many companies because they have to offer much higher interest rates compared to government bonds, which are considered safe. Now we have so much debt that something like this could lead to a complete economic, financial and monetary collapse. And we are not even talking about hyperinflation, as in the Weimar Republic, but simply about inflation with a rate of less than 10% per year.
– The main risk that you describe in the book is climate change. Isn't the growing debt secondary in the light of the possible consequences of a climate catastrophe?– You need to worry about everything at the same time, because all mega-threats are interconnected.
Example: At this stage there is no way to significantly reduce CO2 emissions without the economy falling. Although 2020 marked the worst recession in the last 60 years, greenhouse gas emissions decreased by only 9%. In the absence of solid economic growth, the debt problem cannot be solved. That is, it is necessary to find ways to ensure growth without emissions.
– Taking into account all these parallel crises, how do you assess the chances of democracy to survive against the background of authoritarian systems like China and Russia?– I'm worried.
Democracies are fragile in the face of serious upheavals. There will always be some energetic and courageous person who will say: "I will save the country," and he will blame foreigners for everything. That's exactly what Putin did with Ukraine. Next year, Erdogan may do the same with Greece and try to create a crisis, because otherwise there is a risk of losing the elections. If Donald Trump runs again and loses, he will be able to openly call on white supremacists to storm the Capitol. We will witness violence and a real civil war in the United States. Everything looks good in Germany so far, but what if things go badly in the economy and people start voting for the right-wing opposition?
– You are known not only as an economist-prophet, but also as a secular person. Do you still enjoy it in the current conditions?– I organize not only social events, but also exhibitions: art, cultural and book.
And during the pandemic, I rediscovered my Jewish roots. Today I prefer Saturday dinners in the company of 20 people, with an appropriate ceremony and live music. Or I arrange evening events to discuss some important issues, where the floor is given to everyone. And this is not just chatter, but serious conversations about life and the world in general. While enjoying life, one should not forget to contribute to the salvation of the world.
– What do you mean?"Our carbon footprint is too big.
A significant part of greenhouse gases is accounted for by animal husbandry. That's why I became a Pescatarian (a vegetarian type of diet that allows fish and seafood in the diet. – Approx. InoSMI.) and refused meat and poultry.
– Previously, you spent three quarters of a year on the road, and now?– I travel all the time.
But I'll tell you one thing: I love New York. During the pandemic, I didn't escape to the Hamptons or Miami like many others. I stayed here, watched Black Lives Matter demonstrations, helped the homeless. Every day I saw despair in the eyes of my artist friends who lost their jobs and could not pay for housing. I will stay even if a hurricane like Sandy hits New York, fraught with violence and chaos. You need to look at the world without rose-colored glasses. Even if a nuclear war happens. After all, the first bomb will fall on New York, and the next one on Moscow.
