Nassim Taleb has historically written about “black swans” when it comes to rare, highly unlikely events in financial history. And so today Nouriel Roubini warns of the opposite, of “white swans”.
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• Some events could weigh on the markets in 2020
• Dr. Doom speaks of “white swans” regarding very probable events
• Corona virus is just one of many factors
“Black Swans” stand for extremely rare and improbable events. This is how Nassim Taleb first wrote about this phenomenon in his book “Fooled By Randomness” and even dedicated a book to him: “The Black Swan: The Impact of the Highly Improbable”. Now market expert Nouriel Roubini warns, also Dr. Doom, against the background of some uncertainty factors for the economy, against so-called “white swans”.
That worries Roubini
The expert points to various “white swans” on the market – the corona virus is only one of them, although it may shake the markets as much as no other problem in the recent past. In addition to pandemic concerns, he mentions geopolitical unrest on several fronts, a potentially turbulent presidential election, re-igniting trade disputes with China, potentially catastrophic damage caused by climate change, and increasing potential for cyber wars as events that are very likely to occur in 2020. “This list is hardly exhaustive, but it shows what can be justifiably expected for 2020,” Roubini wrote in an essay for Project Syndicate.
Corona virus scares the markets
His statement that the financial markets However, the stock markets have since refuted the risks and are convinced that a quiet, if not happy, year awaits the major economies and global markets. The fear of the corona virus taught them: In Asia, as well as in Europe and in the USA, the markets are in a downward spiral after they had repeatedly reached new highs a few weeks and months ago. Companies are becoming increasingly cautious due to the still unpredictable economic consequences of the corona virus.
Political problems on four fronts
But Roubini is not only one of the “White Swans” of 2020, the ever-spreading virus. He also takes a critical view of the geopolitical unrest on four fronts, including China, Russia, Iran and North Korea. US President Trump is trying to bring about a change of state leaders in all these countries, including with the help of economic sanctions. In return, Putin, Kim Jong-un and Co. might like to see someone else take over Donald Trump’s presidency in the fall.
He regards the calm between the USA and Iran only as the well-known calm before the storm. “The acute threat he [Trump] for the Iranian regime gives every reason to escalate the conflict with the United States in the coming months – even if this means the risk of a waging war – if there is a chance that the resulting rise in oil prices will Crashes, triggers a recession and lowers Trump’s prospects for reelection, “Roubini explains in his essay.
US-China relationship
Even if the US-Chinese trade war, which has plagued the markets for more than a year, has already been ticked off with the phase 1 agreement in the minds of many and other issues that move the markets have come to the fore Roubini believes the conflict could flare up again. The expert even believes China can read more about the new crisis: “For some Chinese politicians, it cannot be a coincidence that their country is experiencing a massive outbreak of swine flu, severe bird flu, a coronavirus epidemic, and political unrest in Hong Kong Reelection of the Taiwanese president for independence and increased US naval operations in the East and South China Seas. Roubini fears that peace between the United States and China will not last long and that China could take action against the United States – not with direct confrontation, but as part of a cyber war. In his opinion, hackers could look at the US election interfere.
Should China continue to experience problems, this could also shock the US bond market and possibly lead to an economic slowdown in the US. Because Roubini explains that China could dump US government bonds. The resulting burden on Chinese economic growth could then be met with capital gains in the Far East gold – because China has some open and hidden gold reserves – balance again.
Climate change and its consequences
In addition to all the geopolitical risks, Roubini is also critical of the development of the global climate. He does not see climate change as something that will come up at some point, but believes that we are already in the middle of it: “It is a threat in the here and now, as the increasing frequency and severity of extreme weather events shows”. Climate change could lead to costly environmental disasters. And there are still so many individual developments that could all lead to a “white swan” event.
It remains to be seen how the development of the coronavirus will continue and whether there will be other events this year before which Dr. Doom warns to be entering.
Editorial office finanzen.at
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Image source: Vivien Killilea / Getty Images for Berggruen Inst., Chanthanee / Shutterstock.com
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