The white swan harbingers of global economic crisis are already here [View all]

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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.


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Great article -worth the whole read.