{"id":19418,"date":"2023-04-03T05:11:12","date_gmt":"2023-04-03T05:11:12","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/dr-doom-nouriel-roubini-warns-of-looming-banking-crisis-and-trilemma-for-central-banks-economics-bitcoin-news\/"},"modified":"2023-04-03T05:11:12","modified_gmt":"2023-04-03T05:11:12","slug":"dr-doom-nouriel-roubini-warns-of-looming-banking-crisis-and-trilemma-for-central-banks-economics-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/dr-doom-nouriel-roubini-warns-of-looming-banking-crisis-and-trilemma-for-central-banks-economics-bitcoin-news\/","title":{"rendered":"‘Dr. Doom’ Nouriel Roubini Warns of Looming Banking Crisis and Trilemma for Central Banks \u2013 Economics Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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Economist Nouriel Roubini has shared his opinion about bank problems in the United States in a recently published opinion editorial. In the article, Roubini insists that \u201cmost U.S. banks are technically near insolvency, and hundreds are already fully insolvent.\u201d<\/strong><\/p>\n

Roubini: \u2018Liquidity Support Cannot Prevent This Systemic Doom Loop\u2019<\/h2>\n

The renowned economist Nouriel Roubini<\/a>, also known as \u201cDr. Doom,\u201d shared an opinion editorial<\/a> on April 1 via MarketWatch. The article discusses turmoil in the U.S. banking sector, and Roubini highlights how banks in America carry unrealized losses on securities amounting to $620 billion. Furthermore, Roubini mentioned the U.S. Federal Reserve\u2019s rate hike and said, \u201cMaking matters worse, higher interest rates have reduced the market value of banks\u2019 other assets as well.\u201d<\/p>\n

In light of this factor, Roubini says, \u201cU.S. banks\u2019 unrealized losses actually amount to $1.75 trillion, or 80% of their capital.\u201d Moreover, Roubini emphasized that \u201cthe \u2018unrealized\u2019 nature of these losses is merely an artifact of the current regulatory regime, which allows banks to value securities and loans at their face value rather than their true market value.\u201d Roubini continues his blistering criticism of the U.S. banking system, stating:<\/p>\n

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In fact, judging by the quality of their capital, most U.S. banks are technically near insolvency, and hundreds are already fully insolvent.<\/p>\n<\/blockquote>\n

Dr. Doom Says \u2018Everyone Should Be Preparing for the Coming Stagflationary Debt Crisis\u2019<\/h2>\n

In the op-ed, Roubini discusses a concept called the \u201cdeposit-franchise,\u201d and he asserts that depositors can sense deterioration in deposit safety, leading to a loss of trust. \u201cIf depositors flee, the deposit franchise evaporates, and the unrealized losses on securities become realized. Bankruptcy then becomes unavoidable,\u201d Roubini opines. The economist also believes that the U.S. economy may face a harder landing due to the credit crunch caused by banking stress and referred to it as a \u201chouse of cards.\u201d<\/p>\n

Roubini stresses that the world\u2019s central banks \u201cface not just a dilemma but a trilemma.\u201d Furthermore, regional banks, which are vital for financing small and medium-sized businesses and households, are particularly affected, Roubini opined. Therefore, the trilemma for central banks is presented, as interest rate hikes aimed at achieving price stability may result in a recession and higher unemployment, while also increasing the risk of severe financial instability.<\/p>\n

The economist dubbed \u201cDr. Doom\u201d concludes that the trilemma of challenges is compounded by negative aggregate supply shocks such as the Covid-19 pandemic and the war in Ukraine. Roubini\u2019s op-ed adds:<\/p>\n

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A severe recession is the only thing that can temper price and wage inflation, but it will make the debt crisis more severe, and that in turn will feed back into an even deeper economic downturn. Since liquidity support cannot prevent this systemic doom loop, everyone should be preparing for the coming stagflationary debt crisis.<\/p>\n<\/blockquote>\n

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\nTags in this story
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aggregate supply shocks<\/a>, banking sector<\/a>, Bankruptcy<\/a>, capital<\/a>, Covid-19 pandemic.<\/a>, credit crunch<\/a>, deposit franchise<\/a>, depositors<\/a>, Dr. Doom<\/a>, Economist<\/a>, face value<\/a>, Federal Reserve<\/a>, Financial Instability<\/a>, higher interest rates<\/a>, households<\/a>, market value<\/a>, medium-sized businesses<\/a>, Nouriel Roubini<\/a>, Opinion Editorial<\/a>, price stability<\/a>, Recession<\/a>, regulatory regime<\/a>, roubini<\/a>, Securities<\/a>, Small Businesses<\/a>, trust<\/a>, U.S banks<\/a>, U.S. economy<\/a>, Unemployment<\/a>, unrealized losses<\/a>, war in Ukraine<\/a><\/div>\n<\/div>\n

What steps do you think should be taken to address the potential banking crisis and the trilemma facing central banks? Do you agree with Roubini\u2019s op-ed? Share your thoughts about this subject in the comments section below. <\/strong><\/em><\/p>\n

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\nJamie Redman <\/h6>\n

\nJamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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