2019-10 Four Collision Courses for the Global Economy

In this article Nouriel Roubini, a well known economist at New York University sums up the dangers to the world economy:

1. What he calls "a contest between US and China over trade and technology".

2. "Dispute" between US and Iran

3. Brexit

4. Argentina, which appears likely to default on its debts (for the ninth time in the last 200 years, and second time this century).

This was written on Sep 24, so I would add one more:

5. Impeachment investigation in the US.

Let's discuss them in turn.

ad 1. This is the most important. A major cold war between US and China over trade and technology will cause a decline in manufacturing, trade, capital spending and private consumption, pushing the world economy into a recession.

ad 2. A military conflict between the US and Iran would raise the price of oil to $100, causing a recession. Higher price of oil will, at the same time, lead to inflation. The combination of a recession and inflation is called stagflation The most important cases was 1973, following the war in the Middle East and in 1979 after the Iranian revolution.

ad 3. A disorderly Brexit may cause a recession in the European Union.

ad 4. A crisis in Argentina may lead to a capital flight from emerging countries.

You probably do not know it but the author. Nouriel Roubini, has the nickname: Dr. Doom. This is because he predicted the 2007-8 recession and the housing crash. In general, he is pessimistic about the future.

ad 5. The impeachment proceeding against the US president will result in increased uncertainty. With the US president under pressure, who knows how he can react? So be afraid of 2 above and perhaps 1 above.