The golden era of global economic growth is over, and the numerous changes loom, warns star economist Nouriel Roubini of New York University.
reports 7 ways Roubini recently predicted the world will change:
Aging population and the end of the ‘golden era’ of growth
The aging populations in both in Europe and Asia are changing the consumption model on an individual level, and people are saving more, too. Although corporations have enough cash, most of them are not inclined to invest money into new projects the way they have done before, as the level of political, economic, and geopolitical uncertainty has dramatically risen.
China: Expect a 'bumpy landing' but no crash
A hard landing would mean a massive collapse in commodity prices and a sharp devaluation of China and other emerging markets’ economies. The risk of the hard landing, is however, relatively low, according to Roubini. He calls what is likely to happen with China a “bumpy landing” – a 6.5% growth slowdown this year and between 5 and 6 percent potential growth next year, rather than complete collapse.
There is a lot of technological and scientific innovation in different fields of global economy, however, it is concentrated in some spots like Silicon Valley. At the moment, it does not lead to productivity growth, which is the key to the growth of global economy.
Are robots taking over our jobs?
Technological innovation is increasingly capital intensive, skill-biased and saves on labor. The demand for labor is going to shrink further, partly because of robotic substitution and structural changes as well.
The central banks are broken
Fiscal policy instruments are not used to their full potential. There is a huge need for structural reforms worldwide, however, both in democracies and in “less democratic countries” implementation of structural reforms is hard because of the election cycles and the inability of politicians to act in the long-term.
The hyped-up Grexit
The solution of the Greek problem has more of a symbolic meaning for the whole eurozone. The Grexit would mean the beginning of the end of the eurozone, politically.
Commodity super cycle
The commodity super cycle is over not only spurred by the economic slowdown in China, but also due to supply issues such as innovative shell gas, oil technologies, and a significant amount of reserves in Latin America and Africa. Demand for raw materials is obviously low at the moment.
Meanwhile, Byron Wien, vice chairman of Blackstone Advisory Partners, warns that a lot of unfinished business is holding the stock market hostage and creating “a lack of enthusiasm” at the moment.
“Even though the earnings outlook for 2016 is favorable, investors are reluctant to expand their portfolios in the face of so many uncertainties,” he wrote for Barron’s.
“The “will she or won’t she” ambivalence about increasing short-term interest rates by the Federal Reserve is clearly one factor confusing investors. That the Fed failed to raise rates in September, while indicating they will do so before year-end, is puzzling in the face of the fundamentals,” he wrote.
“The economy is growing modestly, but there are important areas of weakness, and inflation is not a problem. While unemployment is down to 5.1%, you have to wonder how many people who would like to have a job have given up looking for one, given that the participation rate is at 62.4%,” he wrote.
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