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Feb. 22, 2020, 12:23 p.m. EST

Here are all the things that could go wrong in 2020, according to Nouriel Roubini

From hot wars to weaponized financial assets, the U.S. faces severe economic, financial, political and geopolitical disturbances

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By Nouriel Roubini


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Russia and China would each like to undercut American hard and soft power abroad by destabilizing the U.S. from within.

NEW YORK ( Project Syndicate ) — In my 2010 book, “Crisis Economics,” I defined financial crises not as the “black swan” events that Nassim Nicholas Taleb described in his eponymous bestseller, but as “white swans.”

According to Taleb, black swans are events that emerge unpredictably, like a tornado, from a fat-tailed statistical distribution. But I argued that financial crises, at least, are more like hurricanes: They are the predictable result of built-up economic and financial vulnerabilities and policy mistakes.

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.”

Financial markets remain blissfully in denial of the many predictable global crises that could come to a head this year, particularly in the months before the U.S. presidential election. In addition to the increasingly obvious risks associated with climate change, at least four countries want to destabilize the US from within.

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.

Four powers

For starters, the United States 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 U.S.-led global order, and 2020 could be a critical year for them, owing to the U.S. presidential election and the potential change in U.S. global policies that could follow.

Under President Donald Trump, the U.S. 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 U.S. from within through asymmetric warfare.

If the U.S. election descends into partisan rancor, chaos, disputed vote tallies and accusations of “rigged” elections, so much the better for America’s rivals. A breakdown of the U.S. 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 U.S. in the coming months — even if it means risking a full-scale war — on the chance that the ensuing spike in oil prices /zigman2/quotes/211629951/delayed CL.1 +1.53% would crash the U.S. stock market /zigman2/quotes/210598065/realtime DJIA -4.06%   /zigman2/quotes/210599714/realtime SPX -3.37%  , trigger a recession and sink Trump’s re-election prospects.

If the U.S. election descends into partisan rancor, chaos, disputed vote tallies and accusations of “rigged” elections, so much the better for America’s rivals. A breakdown of the U.S. political system would weaken American power abroad.

Yes, the consensus view is that the targeted killing of Qassem Soleimani has deterred Iran, but that argument misunderstands the regime’s perverse incentives. War between U.S. and Iran is likely this year; the current calm is the one before the proverbial storm.

Cold war with China

As for U.S.-China relations, the recent “Phase 1” deal is a temporary Band-aid. The bilateral cold war over technology, data, investment, currency and finance is already escalating sharply.

The COVID-19 outbreak has reinforced the position of those in the U.S. arguing for containment, and lent further momentum to the broader trend of Sino-American “decoupling.”

More immediately, the epidemic is likely to be more severe than currently expected, and the disruption to the Chinese economy will have spillover effects on global supply chains — including pharma inputs, of which China is a critical supplier — and business confidence, all of which will likely be more severe than financial markets’ current complacency suggests .

Caroline Baum: Stock market abandons all caution even as killer coronavirus spreads

Although the Sino-American cold war is by definition a low-intensity conflict, a sharp escalation is likely this year. To some Chinese leaders, it cannot be a coincidence that their country is simultaneously experiencing a massive swine flu outbreak, a severe bird flu, a coronavirus epidemic, political unrest in Hong Kong, the re-election of Taiwan’s pro-independence president, and stepped-up U.S. naval operations in the East and South China Seas.

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