Risks

A list of risks to the world, currently in no particular order.

  • Debt Burdens
    • US Debt at February 2022 is 29.9 trillion dollars (127% of GDP).   Each citizen owes ~$89,863.  Deficits have suffered significant negative impacts due to COVID.  During the end of the Trump presidency, they were growing at about $1 trillion per year, currently the US deficit is running at over $2 trillion per year.
    • Canada’s debt is currently at about C$1.2 Trillion which is about 60% of GDP.
    • Other debts are more worrisome including (% of GDP) – Note this data was collected in 2018, before the COVID pandemic:
      • Japan – 236% – The market hasn’t worried about this debt?!
      • Greece – 191% – The country is just ending 8 years of restructuring and is now like a 3rd world country.  This seriously undermined EU stability.
      • Venezuela – 162% – The country is in free fall and the economy collapsing back to 3rd world status despite significant resources
      • Italy – 129.7% – Has just voted in a government that is intent on increasing deficit spending flouting EU control.  There is the potential to devastate EU stability.
      • Portugal – 121.2% – Portugal currently appears to have stabilized their economy.  If the EU is further destabilized concerns could resurface.
      • UK – 86.3% – This level doesn’t seem to high, however the currency has been supported by EU membership.  The uncertainty around Brexit has undermined the currency making these debts much harder to repay.   While a weak currency will assist with industry, exports, employment and sovereignty, the repayment of debt becomes much harder if the loans are in currencies other than pounds sterling.
      • Source: https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD
  • Inflationary Spirals
    • In reality, most countries that implode with inflationary spirals are not systemic risks.  Many of them have been marginalized economically prior to the collapse.   This does not include the human cost which is always dire, but importantly this time some of the network effects are becoming harder to ignore.   These countries are currently either deeply into a collapse or are teetering on the edge:
      • Zimbabwe – This is an ongoing saga for many years.  There is essentially no impact on outside economies save perhaps South Africa
      • South Africa – Teetering on the brink of collapse, the end of white rule has brought about many changes, and very difficult times for many in the country.   The push for control by blacks is commendable, however it has been done without appropriate knowledge and experience in many cases, so the financial picture is becoming very cloudy.
      • Venezuela – Given the political and geographic proximity to the US, this is more newsworthy than most situations of the same nature.   More importantly this collapse is having serious consequences for energy markets and the human suffering is causing mass migration.  This situation is likely to get much worse in the coming years.
      • Argentina – This probably doesn’t count as an inflationary spiral, but another debt crisis will result in significant currency moves and likely devaluation.
      • Zambia – At risk, not following this one in depth
      • Egypt – Not really a spiral, but a significant concern
      • Turkey – Not yet a spiral, but recently had 70% interest rates which imply a country seriously out of control of it’s finances.
      • India – Not a crisis yet, but the currency continues to take a drubbing in one of the world’s largest and fastest growing economies.   This could be a serious problem in the future.
  • Political Risk
    • USA – The continuing divisive politics in the USA risks the end of democracy at best and civil war at worst.   With active and open attempts at voter suppression, a long fight for democracy could ensue.
    • Russia – Russian aggression and meddling are apparent in many countries as close as the Ukraine and as far away as the US and Africa.  The current threat to the Ukraine is critical, with much of the western world at risk of being drawn into a conflict.
    • China – China is also meddling all through the world, with primary areas being in SE Asia and Africa, but they can have significant impact around the world.   As of early 2022, there is also increased economic risks due to a property markets, slowing growth as well as national policies around places like Hong Kong, the South China Sea and more.
    • North Korea – This is mostly headline risk as the country is too small and insignificant to have a major impact on 1st world democracies.   They do fray the allegiances around the world however.   Post Trump, missile testing has been progressing again and capabilities appear to be improving, offering a risk of military conflict with S. Korea, Japan or the US
    • Middle East – These relationships are fragile, fluctuate significantly and can cause significant volatility due to energy, religious issues and capital flows.
  • Economic Risks
    • Due to the unusual financial support afforded to economies during COVID (and arguably since the Great Recession in 2007-2009), the removal of support implies significant economic risk
    • Supply chains are facing unusual difficulty as well.   This is partly due to COVID, but also trade policies with countries like China (mostly manufacturing) and Russia (energy and metals).
    • Debt burdens are covered above.
    • The nature of employment has undergone a shift during the COVID pandemic, and while it is still difficult to assess which of these changes are systemic and which are transitory, the changes are impacting global trade.