Conditions are ripe for repeat of 1970s stagflation and 2008 debt crisis | Nouriel Roubini

Conditions are ripe for repeat of 1970s stagflation and 2008 debt crisis | Nouriel Roubini

Warning signs are there for global economy, and central banks will be left in impossible position

In April, I warned that today's extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.

After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies' public-debt burdens.