10 Geopolitical / Financial Risks to the Global Economy, by Charles Hugh Smith

The global trend towards authoritarianism will certainly make the financial crisis worse. From Charles Hugh Smith at oftwominds.com:

Perhaps the most apt metaphor to describe the decade ahead is that investors, consumers and taxpayers will all be rafting whitewater rapids with ever-briefer stretches of calm.

Geopolitical / financial risks are proliferating and becoming more difficult to predict or hedge for a very basic reason: the era of global integration and accord has ended and the era of global disintegration and discord is heating up. In historian Peter Turchin’s terminology, when everyone finds reasons to cooperate, the result is an era of accord; when everyone finds reasons not to cooperate, the result is an era of discord.

Beneath the chaotic swirl of complex dynamics and risk, two core drivers emerge: de-globalization and de-financialization.

The 30-year era of increasing globalization has reversed, reducing the influence of markets and increasing the influence of national security. Where the globalization era led to global trade agreements which served at least a few of every participants’ core interests, the de-globalization era will be characterized by fragmentation and deals being cut between nations outside of traditional alliances and ideological camps.

In the neoliberal worldview, markets are solutions to virtually every problem: open up markets and let price discovery and innovations solve all problems. This construct is ideologically appealing, but in the real world, markets generated extremely risky supply-chain dependencies on unreliable offshore sources: yes, these dependencies were efficient and profitable, but when things fall apart, they cause dominoes to fall far beyond what “markets” anticipated or could hedge.

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