The first part of this interview with reknowned economist Nouriel Roubini discusses how China is being less than forthcoming in it’s reports on the coronavirus and how it’s affecting people there. Roubini reports that he has a colleague in Shanghai who has been locked in his own home for weeks. He also says that he expects a recession in China, which would lead to a global recession, as a result of the coronavirus. Roubini also says he would not be surprised if there was some kind of a military skirmish in the Strait of Formosa. Here is the portion of the interview regarding Donald Trump and why he won’t be reelected. Der Spiegel:
DER SPIEGEL: This crisis [coronavirus] is obviously a setback for globalization. Do you think politicians like Trump, who want their companies to abandon production abroad, will benefit?
Roubini: He will try to reap benefits from this crisis, that’s for sure. But everything will change when coronavirus reaches the U.S. You can’t build a wall in the sky. Look, I live in New York City and people there are hardly going to restaurants, cinemas or theaters, even though nobody there has been infected by the virus thus far. If it comes, we are totally fucked.
DER SPIEGEL: A perfect scare-scenario for Trump?
Roubini: Not at all. He will lose the election, that’s for sure.
DER SPIEGEL: A bold prediction. What makes you so sure?
Roubini: Because there is a significant risk of a war between the U.S. and Iran. The U.S. government wants regime change, and they will bomb the hell out of the Iranians. But Iranians are used to suffering, believe me, I am an Iranian Jew, and I know them! And the Iranians also want regime change in the U.S. The tensions will drive up oil prices and lead inevitably to Trumps defeat in the elections.
DER SPIEGEL: What makes you so sure?
Roubini: This has always the case in history. Ford lost to Carter after the 1973 oil shock, Carter lost to Reagan due to the second oil crisis in 1979, and Bush lost to Clinton after the Kuwait invasion. The Democratic field is poor, but Trump is dead. Quote me on that!
DER SPIEGEL: A war against Iran is needed to beat Trump?
Roubini: Absolutely, and it’s worth it. Four more years of Trump means economic war!
DER SPIEGEL: What should investors do to brace for the impact?
Roubini: I expect global equities to tank by 30 to 40 percent this year. My advice is: Put your money into cash and safe government bonds, like German bunds. They have negative rates, but so what? That just means that prices will rise and rise – you can make a lot of money that way. And if I am wrong and equities go up by 10 percent instead, that’s also OK. You have to hedge your money against a crash, that is more important. That’s my motto: “Better safe than sorry!”
This is all very plausible and certainly sobering. I think that he’s right insofar as the period of economic expansion we’ve witnessed the past eleven years is over and that change is happening now. As to how bad it will get, we never know that, now do we?