The white swan harbingers of global economic crisis are already here😳Seismic risks for the global system are growing, not least worsening US geopolitical rivalries, climate change and now the coronavirus outbreak
There are times when we should expect the system to reach a tipping point – the “Minsky Moment” – when a boom and a bubble turn into a crash and a bust. Such events are not about the “unknown unknowns” but rather the “known unknowns”.
Beyond the usual economic and policy risks that most financial analysts worry about, a number of potentially seismic white swans are visible on the horizon this year. Any of them could trigger severe economic,
financial, political and geopolitical disturbances unlike anything since the 2008 crisis.
For starters, the US is locked in an escalating strategic rivalry with at least four implicitly aligned revisionist powers: China, Russia, Iran and North Korea. These countries all have an interest in challenging the US-led global order and 2020
could be a critical year for them, owing to the US presidential election and the potential change in US global policies that could follow.
Under Donald Trump, the US is trying to contain or even trigger regime change in these four countries through economic sanctions and other means. Similarly, the four revisionists want to undercut American hard and soft power abroad by destabilizing the US from within through
asymmetric warfare. If the US election descends into partisan rancor, chaos, disputed vote tallies and accusations of “rigged” elections, so much the better for rivals of the US. A breakdown of the US political system would weaken American power abroad.
Moreover, some countries have a particular interest in removing Trump. The acute threat that he poses to the Iranian regime gives it every reason to escalate the conflict with the US in the coming months – even if it means risking a full-scale war – on the chance that the
ensuing spike in oil prices would crash the US stock market, trigger a recession, and sink Trump’s re-election prospects. Yes, the consensus view is that the targeted killing of Qassem Suleimani has deterred Iran but that argument misunderstands the regime’s perverse incentives.
War between US and Iran is likely this year; the current calm is the one before the proverbial storm.
