Crisis prophet Roubini’s debt limit warning: Market may crash
The famous American economist Nouriel Roubini, known as a prophet of the crisis and ‘Doctor Doomsday’, made assessments on the current debt ceiling crisis in the US.
The famed investor, who is also CEO of Roubini Macro Associates, spoke about the US debt ceiling deadlock in an interview with Bloomberg on the sidelines of the Qatar Economic Forum in Doha, the Qatari capital.
‘IF THERE IS NO DEAL, THE MARKET WILL COOL’
The famous US economist, known as the ‘crisis seer’ for predicting the 2008 financial crisis, said that a failure to agree on the debt ceiling could affect markets and damage confidence in the dollar in the long term.
Roubini said that there is a possibility that the agreement to raise the debt ceiling will not be fulfilled and that if it does, the market will collapse. “They can reach an agreement at the last minute,” Roubini said. Or they may not be able to come to an agreement. If that doesn’t happen, the market will crash,” he said.
Roubini had previously warned that the talks could drag on to prevent the United States from defaulting.
GLOBAL RISKS
Roubini also listed the risks to the global economy in the interview. Known for predicting economic disasters, Roubini said geopolitical tensions in Ukraine and Iran, as well as worsening relations between the United States and China, could pose a major challenge to the world economy this year.
Gulf investors, who generate income from high oil and gas prices, are likely to invest their money in technology and the private sector, Roubini said.
Expressing that some regional banks will experience a credit crunch after the US bankruptcies, Roubini also said that the European Central Bank’s interest rate hikes are not over yet.
WHAT IS THE BASIC DEBT LIMIT?
In the US, the federal government has reached the $31.4 trillion debt limit that could lead to default.
The debt limit, or debt ceiling, means “the upper limit of the amount of money the US government can borrow to pay its debts.”
Republicans, who have a majority in the House of Representatives, favor major spending cuts in the debt limit negotiations. Democrats insist on raising the debt limit and reject Republican proposals to cut certain spending.
There is concern that the debt limit issue, which has become an impasse between Democrats and Republicans, will rock markets. As US recessionary expectations rise, the two-party standoff over the debt limit carries more risk than ever.