The times when developed economies grew at high rates are behind us and the next crisis will hit when people realize this, Satyajit Das, author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives told CNBC Tuesday.
Economists estimate that in the US, growth should average around 5 to ensure employment keeps up with the population growth, but currently growth is closer to 2 percent.
"The problem is we have become so addicted to growth that we cannot live without it," Das said.
As governments around the world try to find answers to the low growth dilemma, currency wars risk turning into trade wars, quantitative easing may not work because banks are not lending the money further and there are bubbles in some emerging markets, he explained.
"I think the big crisis will come when people will realize you're not going to get growth and you're not going to get inflation," Das added.
We are entering an era of low growth and this will create a lot of friction, he warned.
"You've got to adjust your thinking and I think markets generally are not good at adjusting to a new paradigm," Das said. "We're probably round about denial and anger and we're probably doing a bit of bargaining."
Haircuts on Europe Debt?
Various countries have tried to manage expectations to buy some time before the truth of low growth will emerge, and finally people will reconcile to the idea, he added.
In Europe, lower growth may mean that peripheral euro zone countries such as Greece, Ireland, Portugal or Spain may not be able to service their debt as their gross domestic product shrinks or remains largely unchanged, according to Das.
"What Europeans have tried to do, quite sensibly, was buy a bit of time," he said.
Haircuts on debt started with the Irish, with the subordinate debt of Anglo Irish Bank, and may continue with senior debt, Das warned.
Banks in Europe, particularly in Germany and France, have been raising capital because they still own bonds from peripheral euro zone countries and "they are going to have to take some haircuts," he said.
Printing money will not serve to boost growth, because banks don't lend the money that is being created, preferring to buy US government bonds instead, Das said.
"To me it's like a beautiful game of circular cash flows. It's a pure confidence game that's being played," he added.
Markets have built up too much expectation regarding quantitative easing and "once it happens they are going to want more," Das said.