Nouriel Roubini: Is the next financial crisis already brewing?

As we mark the tenth anniversary of the global financial crisis, there have been plenty of postmortems examining its causes, its consequences and whether the necessary lessons have been learnt.

So it seems a pertinent moment to ask when the next recession and financial crisis will occur and why. The global expansion is likely to continue this year and next because the US is running large fiscal deficits, China is continuing stimulative policies and Europe remains on a recovery path. Yet by 2020, there are several reasons why conditions for a global recession and financial crisis may emerge.

To start with not only will the current US economic stimulus have gone away by 2020, but a modest fiscal drag will push growth below 2 per cent.

Given the US fiscal stimulus has been ill-timed, the Federal Reserve will have to continue to hike to a level of about 3.5 per cent by early 2020. In addition to the Fed, other central banks will probably start or continue to normalise their policy stances.

To continue reading, click here.

Nouriel Roubini is professor of economics at the Stern School of Business, NYU and Co-Founder of Rosa & Roubini Associates.