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January
30
2023

People We Should Know: Nouriel Roubini
John Rubino

Credible gloom and doom

Nouriel Roubini has one of those resumes that inspire skepticism -- because no one should be able to pack that much high-level work into one lifetime. He has, at various times, been associated with Harvard, the IMF, the Fed, the World Bank, the Council of Economic Advisors, the US Treasury, New York University, and (apparently his day job) Roubini Macro Associates LLC, an economic consultancy.

But more important for our purposes, he was among the very few mainstream economists who saw the debt bubble of the early 2000s for what it was, a prelude to a massive crash. 

So when “Dr. Doom” says today’s financial world is coming to a fiery end, there’s an uncommon amount of experience and credibility backing up the assertion. Here’s an excerpt from an article he published just before the recent World Economic Forum summit in Davos, Switzerland:

Our current age of megathreats resembles the tragic 30-year period between 1914 and 1945 far more closely than it does the 75 years of relative peace, progress, and prosperity after the second world war. It is worth remembering that the first era of globalization was not sufficient to prevent the descent into world war in 1914. That tragedy was followed by a pandemic (of Spanish flu); the 1929 stock market crash; the Great Depression; trade and currency wars; inflation, hyperinflation, and deflation; financial crises and massive defaults; and unemployment rates above 20%. It was these crisis conditions that underpinned the rise of fascism in Italy, Nazism in Germany, and militarism in Spain and Japan – culminating in the second world war and the Holocaust.

But as dreadful as those 30 years were, today’s megathreats are in some ways even more ominous. After all, the interwar generation did not have to deal with climate change, AI threats to employment, or the implicit liabilities associated with societal ageing (since social security systems were still in their early days, and most elderly people died before receiving their first pension cheque). Moreover, the world wars were largely conventional conflicts, whereas now conflicts between major powers could rapidly spiral in more unconventional directions, potentially ending in a nuclear apocalypse.

We are therefore facing not only the worst of the 1970s (repeated negative aggregate supply shocks), but also the worst of the 2007-08 period (dangerously high debt ratios) and the worst of the 1930s. A new “geopolitical depression” is increasing the likelihood of cold and hot wars that could all too easily overlap and spin out of control.

Far too many of us are indulging complacency at the [Davos] summit and ignoring what is happening in the real world below. We are living like somnambulists, ignoring every alarm about what lies in front of us. We had better wake up soon, before the mountain starts shaking.

In the following video he elaborates on the “megathreat” thesis:

He also really dislikes cryptos (double-click on the image):

How do we invest for a “megathreat” world? 

If all hell (or multiple hells) is about to break loose, we should plan accordingly. But how exactly do you plan for multiple crises happening simultaneously? The1970s were inflationary, while the1930s were deflationary. Modern warfare is closer to something from a science fiction novel than to accounts of WWII. And what would a “geopolitical depression" be like?

Generally speaking, smart investors react to uncertainty with diversification and risk avoidance. And since this is uncertainty writ large, maybe the proper response is extreme prepping. Grab that homestead as soon as possible. Get out of tech stocks and government bonds and into gold and silver (of course I’m going to say that). And because debt reduces resilience, get as close to debt free as possible. Embed yourself in your community to maximize the number of people who have your back. And limit your financial investments to shares of companies that have real assets like oil, uranium and precious metals. 

On that note, look for another gold stock profile on Monday.

DollarCollapse.com is managed by John Rubino, co-author, with James Turk, of The Money Bubble(DollarCollapse Press, 2014) andÊThe Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He currently writes for CFA Magazine.

rubino.substack.com