Trump’s Policies May See Return of ‘Bond Vigilantes’, Nouriel Roubini Says

Harry Brumpton and Haidi Lun
·1-min read

(Bloomberg) -- Donald Trump’s return to the US presidency could see the re-emergence of the “bond vigilantes” if he follows through with his big spending plans, Nouriel Roubini said.

Most Read from Bloomberg

“The market discipline is going to be quite quick,” if Trump pushes to make his 2017 tax cuts permanent, Roubini told Bloomberg Television on the sidelines of the UBS Australasia Conference in Sydney on Tuesday. That could curb against more “radical” economic policies, he said.

Trump “cares about market discipline, and if bond yields go higher and the stock market corrects and the bond vigilantes say your policies are unsustainable — with the right economic advisers they’re going to warn him against economic policies and be more moderate than those which were radically populist,” Roubini said.

Subscribe to The Bloomberg Australia Podcast on Apple, Spotify, on YouTube, or wherever you listen.

So far, investors are still trying to ascertain the exact dimensions of Trump’s second-term economic policies, Roubini said.

Nicknamed “Dr. Doom” for his congenital bearishness, Roubini’s pessimism proved prescient ahead of the global financial crisis, though his dire predictions throughout the Covid pandemic underestimated the strength of the economic rebound.

Pre-election, Roubini warned that a combination of trade, currency, monetary, fiscal, immigration and foreign policy of Trump poses much higher risks of stagflationary outcomes than if Kamala Harris won.

He noted that Trump’s policy plans — including imposing higher tariffs, devaluing the US dollar, and taking a tough stance on illegal immigration — threaten to slow the economy and simultaneously spur inflation higher.

--With assistance from Andy Clarke.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.

Latest stories