The white swan harbingers of global economic crisis are already here

[bronxiteforever]

The Guardian
Wednesday February 19, 2020
The white swan harbingers of global economic crisis are already here
By Nouriel Roubini
Seismic risks for the global system are growing, not least worsening US geopolitical rivalries, climate change and now the coronavirus outbreak

I argue that financial crises, at least, are more like hurricanes: they are the predictable result of builtup economic and financial vulnerabilities and policy mistakes...

...China could diversify its reserves by converting them (treasuries) into another liquid asset that is less vulnerable to US primary or secondary sanctions, namely gold. Indeed, China and Russia have been stockpiling gold reserves (overtly and covertly), which explains the 30% spike in gold prices since early 2019...Looking beyond the risk of severe geopolitical escalations in 2020, there are additional medium-term risks associated with climate change, which could trigger costly environmental disasters. Climate change is not just a lumbering giant that will cause economic and financial havoc decades from now. It is a threat in the here and now, as demonstrated by the growing frequency and severity of extreme weather events.

...As of early 2020, this is where we stand: the US and Iran have already had a military confrontation that will likely soon escalate; China is in the grip of a viral outbreak that could become a global pandemic; cyberwarfare is ongoing; major holders of US Treasuries are pursuing diversification strategies; the Democratic presidential primary is exposing rifts in the opposition to Trump and already casting doubt on vote-counting processes; rivalries between the US and four revisionist powers are escalating; and the real-world costs of climate change and other environmental trends are mounting.

This list is hardly exhaustive but it points to what one can reasonably expect for 2020. Financial markets, meanwhile, remain blissfully in denial of the risks, convinced that a calm if not happy year awaits major economies and global markets.

• Nouriel Roubini is a professor at NYU’s Stern School of Business and was senior economist for international affairs in the Clinton White House’s Council of Economic Advisers. He has worked for the IMF, the US Federal Reserve and the World Bank.


More here
https://www.theguardian.com/business/2020/feb/19/the-white-swan-harbingers-of-global-economic-crisis-are-already-here?CMP=Share_iOSApp_Other

Great article -worth the whole read.

[Moostache]

1. How many people remember the ACTUAL trigger for the mortgage crisis?

I am not talking about the derivatives market or the NINJa (No Income, No Job) loans or the pushing of more mortgage than a buyer could afford with teaser rates and the pyramid-like structure of the whole thing...I am talking about what EVENT started the dominos falling that led to the mortgage defaults and then the collapse of the literal house of cards market...

It was a spike in gas prices, in some ways tied to speculative hoarding of crude oil to drive the prices up, but in reality it was once gas got near $5+ per gallon in the US after decades in the $1.50 to $2.50 range (national average cost, not local spikes) that things got dicey FAST... I remember the pump shock at the time and thinking to myself that if it was putting a pinch on MY SPENDING (skipping the convenience store, no more fountain sodas or snacks or extra spending due to the price of a fill up) that it HAD to be impacting other people as much or more in many cases. The mortgage market was ripe for a fall and was being stuffed full of toxic shit for sure, but an EVENT had to trigger the collapse, just as dominoes laid out in patterns require a nudge to start falling, so too does the economy.

IN 2007-2008, crude oil spiked to >$120 a barrel and the price of gas hit a NATIONAL AVERAGE high of $4.11 in July before a rapid decline saw prices return to the "norm" range (around $1.90-2.10) by January of 2009, but the dammage had been done. People on the fringe of the mortgage market, those with the least ability to absorb rate hikes or adjustments following a teaser period started to see no way out - not only was their situation bad, the rise in gas prices and the need to fuel the vehicle to get to work or to get food
meant even less for ancillary things like entertainment spending or eventually the mortgage bill itself...they lacked the resources to do anything more than default and walk away - "Jingle Mail" with the keys in an envelope, became a real problem. When people were suddenly faced with the real dilemma of having no way out besides walking away, thousands did so out of lack of other options.

Those events snowballed into the massive global near collapse of the entire economy...but the conditions alone were insufficient to start the collapse on their own. Right now, the conditions are even worse because there are going to be PHYSICAL constraints brought into the equation beyond the economy or confidence of consumers. It is primed to be worse than anything humanity has ever faced because of the pervasiveness of the overall impacts. The dominoes are in place and laid out for a spectacular fall...all it is going to take is a trigger event, like say Trump refusing to acknowledge an electoral defeat (if we make it THAT far...he is eviscerating the rule of law right now and eventually people will wake the fuck up.....right?.....RIGHT?!??!?!)...

[bronxiteforever]

2. I totally agree that Orange Nero is capable of initiating

A collapse. If he does something that causes banks to believe we are a banana republic, I see a collapse like you. The investment bankers are really in a pickle then because they are riding the bull of this economy. If the bottom falls out, there will be no love for them from our party and Sarah Palin’s “banksters” insult is fully embraced by the Maga crowd even if Trump doesn’t like it.

Obama saved the system in 2009-2010 and took endless crap for it. There is no love to do it again after the attacks on him and our party. Also, the monetary weapons no longer exist thanks to the Trump/Toomey bill that bombed federal revenues.

I agree the next economic hit will be very bad. I hope not as bad as you suggest but I would not be shocked to see it be that bad.

[Warpy]

3. Crashes happen when people are holding debt they have no ability to pay

The proximate trigger can be anything. It might have been oil prices, as you say. It might have been a few plutocratic potentates discussing what those CDOs actually represented in the way of liar loans and balloon mortgages, then going out and dumping the lot into the market the next day. I think we'll always have suspects, but no smoking guns.

This one, which was assured by the Slug's massive tax cuts to the wrong people, could be triggered by an Iran war, as Roubini suggests in the OP. Or it could be a slowdown initiated by Corvid-19 spreading across SE Asia, including Inonesia, crippling offshore production...and then spreading to the Indian subcontinent where it will do the most damage. It could be a few plutocratic potentates discussing the new plague and deciding this is the time to make their assets more liquid and head for their bolt holes. Something will trigger it, we just don't know when.

We also won't know the correct thing to do to protect ourselves until it's all over and we count up what's left.

[calimary]

4. K&R&Bookmarking