An economist and Stern School professor, Nouriel Roubini, has been making some worrisome predictions about the future that the economy faces. In fact, he has even noted that there is another financial crash coming in 2020, and this one will be even worse than what the country experienced in 2008. As a result, Roubini believes that the saving grace will be cryptocurrency, providing an opportunity to save the value and digital assets that consumers have.
Roubini took to Project Syndicate to list 10 different factors that will contribute to this crisis. The first, he says, is due to how the Federal Reserve (FED) is raising the inflation rate.
In the post, Roubini continued, saying,
“Second, because the stimulus was poorly timed, the US economy is now overheating, and inflation is rising above target. The US Federal Reserve will thus continue to raise the federal funds rate from its current 2% to at least 3.5% by 2020, and that will likely push up short- and long-term interest rates as well as the US dollar.”
The central bank controls fiat currency. Even though the value is stable, the inflation rate in the economy makes it less valuable. The fourth-worst correction of the crypto market happened in 2018, when the market experienced a drop of about 80% across every token. However, there were a few fiat currencies that still managed to perform well at the time, like the Argentinian peso, Venezuelan bolivar, and Turkish lira.
The United States dollar has stayed strong, but the impending doom of financial ruin challenges the value and preservation of currencies around the world. Still, with the way that the United States has been adding to the financial obligations of citizens, including mortgages and student loans, the recession would easily hit harder than it did before.
Roubini elaborated on this note, saying,
“Finally, once the perfect storm outlined above occurs, the policy tools for addressing it will be sorely lacking. The space for fiscal stimulus is already limited by massive public debt. The possibility for more unconventional monetary policies will be limited by bloated balance sheets and the lack of headroom to cut policy rates.”
It is no secret that Roubini has been critical of Bitcoin and cryptocurrency, believing that their lack of evolution into fiat currency leaves them weakened and worthless in the economy. However, that opinion is being challenged as financial institutions like Goldman Sachs and Citigroup increase adoption of cryptocurrency. Clearly, cryptocurrency is becoming a worthwhile asset, and it may help with the looming financial crisis.
The founder and partner of Morgan Creek Digital, Anthony Pompliano, made the comment that the connection with cryptocurrency might be something that institutions are encouraged to connect with.
In a tweet, Pompliano said,
“Unpopular opinion: Institutions will come under pressure in next 5 years if they have 0% exposure to Bitcoin & digital assets. As fiduciaries, they need to invest capital in the best risk-adjusted opportunities. Digital assets historically provide best returns per unit of risk.”
With the emergent situation that could arise at this point, going after a cryptocurrency solution could be the best way to save consumers from major losses. However, it is up to financial institutions to support the transition, if they want to avoid being lost in the crisis.