Renowned economist and professor Nouriel Roubini, who predicted the 2008 financial crisis, is warning investors they should prepare for a period of decline which will be worse than the crashes of the 1970’s and 2008.

In an interview with Bloomberg on Thursday, he warned that he does not believe central banks will be able to continue to hike rates in the face of the economic collapse coming, no matter how bad inflation is. He went on, “It’s going to get ugly, the recession, and you’ll have a financial crisis.”

He noted stocks have already lost 20% this year so far, private equity is strained, US real estate is cooling, and the credit market is slumping, all after companies piled on debt during the past few years while interest rates were low, leaving them unable to shoulder more debt, especially at current rates.

He explained, “Inflation is not going to fall fast enough because you have the negative supply shock. Remember, when you have negative supply shock, you get a recession and high inflation. We’re not going to get a fall in inflation that’s rapid enough to go to 2%.”

He said this would produce a period combining the the worst qualities of the 1970’s and the Global Financial crisis of 2008. “This is just the beginning of that pain. Wait until it’s real pain. And then you have a major financial institution that may crack globally, not in the US maybe now, but certainly internationally,” he said.

He warned, “There are a couple of firms that are huge and systemic. They can go under. You might have another Lehman effect, then the Fed will have to wimp out. You’ll have a severe recession and you’ll have a financial market shock. They’re going to wimp out for sure.”

Roubini came to be known as Dr. Doom after his accurate prediction of the 2008 financial collapse.

Image of Nouriel Roubini courtesy of Nouriel Roubini – World Economic Forum Annual Meeting 2012