The new era of stagflation is here, according to Nouriel Roubini.

It is much harder to achieve a soft landing under conditions of stagflationary negative supply shocks than it is when the economy is overheating because of excessive demand. Since World War II, there has never been a case where the Fed achieved a soft landing with inflation above 5% (it is currently above 8%) and unemployment below 5% (it is currently 3.7%). And if a hard landing is the baseline for the United States, it is even more likely in Europe, owing to the Russian energy shock, China’s slowdown, and the ECB falling even further behind the curve relative to the Fed…

But US and global equities have not yet fully priced in even a mild and short hard landing. Equities will fall by about 30% in a mild recession, and by 40% or more in the severe stagflationary debt crisis that I have predicted for the global economy. Signs of strain in debt markets are mounting: sovereign spreads and long-term bond rates are rising, and high-yield spreads are increasing sharply; leveraged-loan and collateralized-loan-obligation markets are shutting down; highly indebted firms, shadow banks, households, governments, and countries are entering debt distress. The crisis is here.

Project Syndicate

But at the moment, pretty much everybody who wants a job can get one, whereas stagflation would imply high unemployment coupled with inflation that won’t go away.

So we will see what happens here. For people just a few years away from (planned) retirement, this must be nerve wracking. For those of us a decade or more away, we hope we can ride this one out (as the bumper sticker says, lord just give me one more bubble…). Or is this the one where we have a human-caused financial crisis, and then food supply and fires and floods and earthquakes and volcanoes and (nuclear) warfare prevent us from ever returning to the baseline? No, I’m not predicting that, but I think it is a possible outcome that we are not doing much to mitigate.