Please find attached below the full text of my new column on “White Swans of 2020” that has been just published in Project Syndicate at:
In this article I present the vastly out-of-consensus view that 2020 will be the most momentous year for the global economy, financial markets and geopolitics since the Global Financial Crisis of 2007-09 as a series of extreme White Swan events - mostly related to geopolitical risks - will hit the global economy very hard.
I would very much appreciate your feedback on my views and thesis as it is controversial and vastly out of consensus. In my view the shocks that are likely to hit the global economy could be as severe as those experienced during the global financial crisis.
The White Swans of 2020
By Nouriel Roubini
NEW YORK – 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.”
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 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 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 President Donald Trump, the US is trying to contain or even trigger regime change in these four revisionist 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, and disputed vote tallies, and accusation of “rigged” election so much the better for America’s rivals. 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 a perverse incentive 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 targeting killing of Qassem Suleimani has deterred Iran; but that argument misunderstands the regime’s incentives. War between US and Iran is likely this year; the current calm is the one before the proverbial storm.
As for US-China relations, the recent “phase one” 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 US 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 supp