Four Collision Courses for the Global Economy

The comments below are an edited and abridged synopsis of an article by Nouriel Roubini

Between US President Donald Trump’s zero-sum disputes with China and Iran, UK Prime Minister Boris Johnson’s brinkmanship with parliament and the European Union, and Argentina’s likely return to Peronist populism, the fate of the global economy is balancing on a knife edge. Any of these scenarios could lead to a crisis with rapid spillover effects.

Four Collision Courses for the Global Economy | BullionBuzz
collision course illustration

In all four scenarios, both sides want to save face, but they are all involved in the classic game of chicken.

The problem is that while compromise requires both parties to de-escalate, the tactical logic of chicken rewards crazy behaviour. If you can make it look like you have removed your steering wheel, the other side will have no choice but to swerve. But if both sides throw out their steering wheels, a collision becomes unavoidable.

The good news is that in the four scenarios listed, each side is still talking to the other, or may be open to dialogue under some face-saving conditions. The bad news is that all sides are still far from any kind of agreement. Worse, there are big egos in the mix, some of whom might prefer to crash than be perceived as a chicken. The future of the global economy thus hinges on four games of daring that could go either way.

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