Locked down

China’s coronavirus semi-quarantine will hurt the global economy

It may affect industries from tourism to plastic flowers

THE YU GARDEN, a 16th-century complex of pavilions and ponds in the heart of Shanghai, is all gussied up for the Chinese new-year holiday. Its walkways are bedecked with colourful lanterns, its stalls laden with dumplings, its entrances flanked by dozens of security guards to handle crowds. Just one thing is missing: people.

Fearful of coronavirus, they are staying home. “I’ll be doing well if I make a few sales today,” says Li Xinming, manager of a silk-scarf shop. Last year Yu Garden attracted 700,000 visitors during the holiday week, peak season for it and its merchants. This year, Mr Li says his losses might wipe out his earnings for months to come.

The question for China, and for the many companies and countries around the world linked to its economy, is whether Mr Li’s travails are indicative of a much broader problem. The obvious reference point is China’s battle with SARS, another coronavirus, in 2003.

Growth slowed sharply at the height of the epidemic but rebounded swiftly after it was contained. Other recent epidemics have reinforced the impression that economists should not be overly worried, so long as good doctors are on the job. Neither avian flu in 2006 nor swine flu in 2009 dimmed the global Outlook.

Yet even flint-hearted investors are wondering whether the new epidemic might be worse. Stocks in Hong Kong have fallen by more than 5% as reported infections have steadily increased. Tremors have also rippled through global markets.

The concern is less the severity of the virus, which seems less lethal than SARS, but rather the nature and potential duration of China’s efforts to bring the outbreak under control. And disruption in China, the world’s second-biggest economy, has global consequences. “It’s not the disease, it’s the treatment,” wrote analysts with Gavekal Dragonomics, a consultancy.

The World Bank has estimated that as much as 90% of the economic damage from epidemics stems from people’s fear of associating with others, which leads offices and stores to close. In China, this is being magnified by the government’s policy of isolating affected areas and limiting interpersonal contact throughout the country. While public-health experts debate whether this is the right approach, economists will count the costs.

The most direct impact is being felt in Hubei province. First Wuhan, its capital, was placed under quarantine. Then the rest of the province, home to 59m people, was locked down, too. Apart from food trucks and medical supplies, little can enter its cities and villages, and few are permitted to leave. Such a large-scale isolation is unprecedented as a public-health strategy. Economic activity of just about any kind, short of hospital care and movie streaming, has ground to a halt. Hubei generates 4.5% of China’s GDP, so the closure will leave a hole.

Other cities in China may not be under quarantine but that is what life feels like for their residents. Instead of getting together with family and friends, attending temple fairs and going to restaurants—all, depending on where one lives, staples of the holiday—people have shut themselves in. The government has encouraged them to avoid crowds; many need little prodding.

That will be a drag on consumption. The extent of the damage will depend on how long it takes to stop the virus, but the timing is already rotten. Last year retail sales topped 1trn ($144bn) yuan during the new-year week, a third more than an average week. This year, sales are sure to fall well short of that.

Some industries are being hit especially hard. The holiday accounted for 9% of China’s box-office revenues last year. This year almost all of the country’s 11,000 cinemas are closed. Spending on domestic tourism during the new-year week reached more than 500bn yuan last year, about 8% of the annual total. This year, fearful of the virus, people have cancelled trips.

There are also worries about how the virus will affect factories and offices. Several major economic centres, including Shanghai and Guangdong province, have extended the new-year holiday by a week, telling companies to wait until February 10th to restart. Chinese businesses are always slow to get back up to speed after the holiday.

The extra week will make them slower, even if some firms such as Tencent, a tech giant, let employees work from home. Moreover, tens of millions of migrant workers, back in their hometowns for the holiday, may wait for the epidemic to recede before crowding onto trains and buses to return to their jobs.

I feel your pain

One crucial difference compared with SARS is China’s importance for the rest of the world. In 2003 China generated 4% of global GDP. Last year, it was 16%. The slowdown in consumption and the disruption to production will not stop at its borders.

Countries accustomed to big-spending throngs of Chinese tourists face a brutal stretch. China’s government has ordered all tour groups to be suspended until the virus is contained. In Thailand, authorities expect the number of Chinese visitors will fall by 2m to 9m this year, reducing tourism revenue by some $1.5bn. Share prices of airlines have plunged; past epidemics have caused huge, if temporary, drops in passenger traffic, and China is the world’s biggest outbound international travel market.

Companies that have hitched themselves to China’s fast-growing middle class are also vulnerable. Starbucks has temporarily closed more than half of its 4,292 cafés in China.

Footfall in those still open is scarce, with some posting signs that patrons may only enter if they are wearing face masks. Sales of masks are, indeed, a rare bright spot for companies such as 3M. Disney closed its resort in Shanghai for the new-year holiday, one of its busiest weeks of the year (adding insult to injury, China has just entered the Year of the Rat and the Chinese term for rats also refers to mice, a fine marketing opportunity for a brand built around them).

The closure of factories will cascade through the global economy. Wuhan itself is a manufacturing hub, especially for the auto industry. Nissan, Honda and General Motors, among others, have plants there. Bloomberg ranks Wuhan 13th out of 2,000 Chinese cities for its role in supply chains. One local company, Yangtze Optical Fibre and Cable, is the world’s biggest maker of the wires that carry data around the planet.

Even if the work stoppages elsewhere are milder, they, too, will be a risk for a wide range of sectors. Some are vitally important; roughly 80% of active ingredients for all medicines come from China. Others are less so; China supplies nearly 90% of the world’s plastic flowers.

Many companies were already working to reduce their reliance on China’s factories because of its trade war with America. The virus is a powerful reminder that, politics aside, a diversified base of suppliers is a good insurance policy. But the past year provided a lesson in how difficult that is; despite the tension with America, China’s share of global exports actually increased. Companies will struggle to find substitutes for its manufacturing muscle.

Adding it all up, the Chinese economy is in for a grim start to the Year of the Rat, and this will cast a shadow globally. Chen Long of Plenum, a consultancy, thinks China’s growth could slouch to 2% year-on-year in the first quarter, its weakest in decades, down from 6% in the final quarter of 2019.

But he expects a strong rebound when the country gets back to normal. People long cooped up will flock to shops and restaurants. Factories will rush to make up for lost time. To give the recovery a push, officials will increase infrastructure spending.

The unknown is when normality might resume. In Yu Gardens, Mr Li could not wait. With business way down, he has told the three assistants in his silk-scarf shop to stay home, unpaid—typical for small businesses in China. The death toll from the coronavirus remains mercifully low. But the whole country is paying a Price.

Central banks are swimming against the tide on inflation

If they are serious about their mandates, the Fed and ECB should consider other strategies

Megan Greene

IMF Director Christine Lagarde (L) speaks with US Chairman of the Federal Reserve Jerome Powell during the family picture of the G20 Finance Ministers and Central Bank Governors meeting in Buenos Aires, on July 21, 2018. - Global trade conflicts triggered by the protectionist policies of US President Donald Trump are set to dominate this weekend's meeting of Group of 20 finance ministers in Buenos Aires. (Photo by EITAN ABRAMOVICH / AFP) (Photo credit should read EITAN ABRAMOVICH/AFP via Getty Images)
Christine Lagarde, now ECB president, with Fed chairman Jay Powell during the G20 meeting in Buenos Aires in 2018, when she was IMF managing director © Eitan Abramovich/AFP/Getty

The policy framework reviews under way at the Federal Reserve and now the European Central Bank are the monetary equivalent of swimming upstream: a lot of energy will be expended, but they won’t really get anywhere. To the extent that these reviews continue to focus on tweaking inflation targets as a strategy, they will be largely pointless.

The Fed and the ECB have been clear that it is not their mandates that are in question, but how to fulfil them. The prevailing strategy has been to set an explicit target for inflation. The idea is that this builds credibility with markets and consumers, who will then know what inflation is likely to be over the medium to long term. This worked when inflation was high and variable.

But now we have the opposite problem. Since 2009, the Fed’s favourite measure of inflation, the personal consumption expenditures price index, has averaged 1.5 per cent, well below the 2 per cent target. The ECB has fared even worse, with its favourite measure, the Harmonised Index of Consumer Prices, averaging only 1.3 per cent over the decade. (The ECB target is “close to, but below, 2 per cent”).

Stubbornly low inflation pulls benchmark interest rates down, giving a central bank less ammunition to fight future recessions. And persistently failing to hit an inflation target undermines a central bank’s credibility.

Inflation targeting can also result in counterproductive monetary policy in the face of supply side shocks, such as oil price spikes or jumps in productivity. Nevertheless, both the Fed and the ECB seem determined to stick with some variation of inflation targeting. The Fed has said it will not change its 2 per cent target. The other options it is deliberating appear to be price-level targeting and average inflation targeting.

The ECB, which has only just started its review, has made no commitment to its target. But according to a Bloomberg survey of economists, nearly 90 per cent expect any new strategy to enable the central bank to under- and overshoot an inflation goal.

Obliging a central bank to overshoot on inflation after undershooting lacks credibility given that central banks have persistently failed to hit their targets for the past decade. If they are serious about achieving their mandates more effectively, the Fed and ECB should consider other strategies.

One has been circulating for decades: target the sum of inflation and total real output, or nominal gross domestic product. With NGDP targeting, a central bank automatically lowers rates as output falls, to push up inflation. That eases real debt burdens and lowers real interest rates, helping to generate growth. As output rises, rates adjust higher to bring inflation down and maintain the target.

A potential obstacle is that NGDP is reported quarterly, with a lag. But NGDP could be reported more frequently and accurately if the Fed treated it as a priority. The Fed could also target the forecast of NGDP instead, which is reported in the monthly blue-chip economic indicators survey of business economists.

Another strategy is yield curve control, employed by the Bank of Japan. If growth and inflation are weak, the central bank can peg rates low, reducing borrowing costs, raising stock prices and weakening the currency.

Consumption and investment rise, boosting growth and inflation. If investors believe the central bank is determined to maintain the peg, it can achieve this without buying up many assets. But if investors are sceptical, the central bank is forced to expand its balance sheet or lose credibility.

There are no silver bullets. And this shouldn’t be just a public relations exercise. The Fed and ECB should think boldly about alternative approaches.

The writer is a senior fellow at Harvard Kennedy School

What the Middle East Peace Plan Really Means

By: Caroline Rose

The “Deal of the Century,” the name the Trump administration has given the Middle East peace plan released yesterday, is historically significant – just not for the reasons you’d think.

Territorially, it wouldn’t change much for Israel and the Palestinian Territories; it lets Israel retain most of the land it currently controls, keeping a third of the West Bank for itself, while conceding very little to the Palestinians, who have already enthusiastically rejected the proposal.

No, the Deal of the Century is remarkable for the overwhelming support it has among Gulf Arab states. Saudi Arabia, the United Arab Emirates, Egypt, Bahrain, Qatar and Morocco have all endorsed the proposal, though they have offered nothing specific about what they would do to see it through.

Still, their collective rush to champion the deal is notable for what the breach between Arab Gulf states and the Palestinian Authority signifies: the new geopolitical reality emerging in the Middle East, one arrayed against the actions of Turkey and Iran.

The Israeli-Palestinian conflict has defined the battle lines and the foreign policies of Sunni Arab states for more than half a century. Siding with the Palestinian cause and opposing Israeli aggression was a policy fixture of Arab countries, particularly of Egypt, which led the pan-Arab movement in the mid-20th century. Arab support in this regard was formalized in the Arab League, the Palestinian National Council and, later, the Palestine Liberation Organization.

The Palestinians relied on Arab funds and weaponry in their intifadas and, in some cases, multilateral intervention in the face of Israeli military action. Even after Arab states began to engage in limited cooperation with Israel, they still rhetorically advocated for Palestine. But over the past few years, Israel and Arab Gulf countries have found more common ground on matters of mutual interest, which means the unconditional backing of Palestine is coming to an end.

The alliance between Gulf states and Israel had been developing over the past 20 or so years, as evidenced by informal intelligence-sharing and limited security cooperation over terrorist threats and Iranian proxies, but the new sense of urgency reflects the Arab Gulf’s growing fears over the rise of Turkey and Iran and the need to confront both with a united front.

Put simply, the expansion of Iranian influence has become the security priority to which all other foreign policy issues take a back seat. The same could be said in response to Turkey, which has been aggressively advancing its interests in Syria and the Eastern Mediterranean.

Unsurprisingly, Iran and Turkey, neither of which are Arab, have been the loudest voices outside the Palestinian Territories that oppose the Trump administration’s peace deal.
In that sense, the “Deal of the Century” is not about an Israel-Palestine peace; it’s about reconfiguring the alliance structure of the Middle East.

Sunni Arab countries are beginning to pivot from foreign policies grounded in post-WWI realities and nationalisms stemming from 20th-century colonial mandates that defined the regional balance of power. Now they are becoming more visible in redefining regional geopolitics and aligning with former adversaries, grounded in new, emerging security threats.

Re-Engineering China’s Economy

The recent “phase one” trade deal between the United States and China does not resolve core outstanding bilateral issues, and the two countries’ strategic rivalry will likely intensify in the medium to long term. But the accord gives China’s leaders a new opportunity to develop better and more open domestic markets.

Andrew Sheng , Xiao Geng

sheng96_ Kevin FrayerGetty Images_china workers bus

HONG KONG – On January 15, US President Donald Trump and Chinese Vice Premier Liu He signed a “phase one” agreement aimed at containing the two countries’ long-running bilateral trade war.

But no sooner had the deal been concluded than China was confronted with an emergency in the form of the deadly coronavirus outbreak in Wuhan.

These recent developments indicate that China is still struggling with what the father of the country’s nuclear program, Qian Xuesen, called in an influential 1993 paper an “open complex giant system” issue.

Qian, a leading student of systems engineering, argued that because human brains have one trillion interacting neural cells, individual humans are themselves open complex giant systems that are open to complex material, energy, and informational exchanges with other humans.

Likewise, a social system is a macroscopic open giant system that interacts with other social systems, and thus is too complex for any computer to model.

Indeed, any systems engineering aimed at civilizational development would have to address even more complex material, political, and spiritual aspects of transformation and interaction that are not reducible to quantitative terms.

The only solution, therefore, is a process of qualitative analysis followed by rigorous and reiterative testing against empirical facts until different paths or policy options are found – or, as Deng Xiaoping famously said, “crossing the river by feeling the stones.”

Qian’s analysis was far-sighted. “All this shows that the one-track mind and piecemeal reform just does not work,” he wrote. “Reform needs overall analysis, overall design, overall coordination, and [an] overall plan. This is the realistic significance of […] social systems engineering to the reform and opening policy in China.”

In a recent blog post on how to reform the United Kingdom’s civil service, Dominic Cummings, an adviser to British Prime Minister Boris Johnson, cited Qian’s observation that social systems engineering must be deeply integrated into Chinese national planning.

“If you want to change Whitehall from 1) ‘failure is normal’ to 2) ‘align incentives with predictive accuracy, operational excellence, and high performance,’” Cummings wrote, “then systems management provides an extremely valuable anti-checklist for Whitehall.”

From Beijing and Whitehall to Brussels and Washington, policymakers are struggling with problems – such as climate change, inequality, and technological and ideological rivalry – that seemingly defy simple solutions. They are thus buying time, which may be sub-optimal for the world as a whole.

For example, the “phase one” US-China trade deal does not resolve core outstanding issues such as the persistent bilateral trade imbalance, fair competition in technology and related sectors, and deep and comprehensive institutional and governance reforms. Moreover, the two countries’ strategic rivalry will likely intensify in the medium to long term. But the accord does give China’s leaders a new opportunity to develop better and more open domestic markets.

For starters, China’s commitment under the agreement to stabilize the renminbi’s exchange rate and open up its financial-services sector recalls the 1999-2005 period, when a stable exchange rate anchored important reforms. (This period ended – and the reforms subsequently stalled – when the renminbi was allowed to float after July 2005.)

Moreover, China needs a period of stable trade and economic relations with the US in order to tackle the growing systemic risks of rising debt, declining public and private investment, housing-market imbalances, and weak technological innovation. The recent deal (if it holds) gives the authorities two years to continue transforming China into a modern market economy in a way that would benefit both its own citizens and the international community.

Further clarifying and distinguishing the respective roles of the state and the market will be key to this transformation. China’s leaders recognize the usefulness of relying on the market as the dominant mechanism for allocating resources, but also emphasize the state’s essential role in providing public goods such as national security, hard and soft infrastructure, and social-security programs, including timely responses to public-health hazards such as the coronavirus outbreak.

China’s central and local governments therefore must harness the rapid growth of markets, private businesses, and information technology to work off the deadweight loss of non-performing loans and excess capacity in obsolete industries – the result of misguided, poorly designed, or outdated policies and regulations. If these efforts succeed, the newly released resources could be deployed to encourage local and national technology innovation, thereby creating new jobs and green products and services.

Clearing out the deadwood in China’s economy will be critical, and central and local governments’ role in allocating losses is vital to controlling systemic risks. Deadweight losses are sunk costs and should not affect investments that are essential to making future growth and development more sustainable.

Moving financial and real resources from low- to high-productivity projects would deepen the financial system and make it more efficient (with much lower interest rates), thereby creating more open, transparent, and market-oriented conditions for development.

Qian’s systems-engineering approach to reform suggests that boosting energy efficiency and producing more green products and services would enable China to make a major contribution to global public goods and reduce its dependence on imported energy.

By linking water, energy, health, and social aspirations within a material, political, and spiritual/civilizational systems approach, China would become less confrontational and competitive vis-à-vis the rest of world and more focused on forging mutually respectful relationships that do not threaten other countries’ national security.

Although China’s strategic options in addressing major global challenges are essentially similar to those of many other states, the country’s scale and unique complexities set it apart. In particular, the size of China and America’s combined carbon footprint means that the recent bilateral trade truce is crucial to the world’s chances of tackling the existential threat posed by global warming.

That threat is rising at a time when slower global growth and increasing social unrest – in part triggered by climate change and natural disasters – are being exacerbated by failing governance. The phase one trade deal will not end great-power rivalry between the US and China, but it could help prevent that rivalry from destroying the planet.

Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission. His latest book is From Asian to Global Financial Crisis.

Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor and Director of the Research Institute of Maritime Silk-Road at Peking University HSBC Business School.

The White Swans of 2020

Financial markets remain blissfully in denial of the many predictable global crises that could come to a head this year, particularly in the months before the US presidential election. In addition to the increasingly obvious risks associated with climate change, at least four countries want to destabilize the US from within.

Nouriel Roubini

roubini137_Mikhail SvetlovGetty Images_xi putin

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 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, disputed vote tallies, and accusations of “rigged” elections, 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 every reason 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 targeted killing of Qassem Suleimani has deterred Iran, but that argument misunderstands the regime’s perverse 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 supply chains – including pharma inputs, of which China is a critical supplier – and business confidence, all of which will likely be more severe than financial markets’ current complacency suggests.

Although the Sino-American cold war is by definition a low-intensity conflict, a sharp escalation is likely this year. To some Chinese leaders, it cannot be a coincidence that their country is simultaneously experiencing a massive swine flu outbreak, a severe bird flu, a coronavirus epidemic, political unrest in Hong Kong, the re-election of Taiwan’s pro-independence president, and stepped-up US naval operations in the East and South China Seas.

Regardless of whether China has only itself to blame for some of these crises, the view in Beijing is veering toward the conspiratorial.

But open aggression is not really an option at this point, given the asymmetry of conventional power. China’s immediate response to US containment efforts will likely take the form of cyberwarfare. There are several obvious targets. Chinese hackers (and their Russian, North Korean, and Iranian counterparts) could interfere in the US election by flooding Americans with misinformation and deep fakes. With the US electorate already so polarized, it is not difficult to imagine armed partisans taking to the streets to challenge the results, leading to serious violence and chaos.

Revisionist powers could also attack the US and Western financial systems – including the Society for Worldwide Interbank Financial Telecommunication (SWIFT) platform. Already, European Central Bank President Christine Lagarde has warned that a cyberattack on European financial markets could cost $645 billion. And security officials have expressed similar concerns about the US, where an even wider range of telecommunication infrastructure is potentially vulnerable.

By next year, the US-China conflict could have escalated from a cold war to a near-hot one. A Chinese regime and economy severely damaged by the COVID-19 crisis and facing restless masses will need an external scapegoat, and will likely set its sights on Taiwan, Hong Kong, Vietnam, and US naval positions in the East and South China Seas; confrontation could creep into escalating military accidents.

It could also pursue the financial “nuclear option” of dumping its holdings of US Treasury bonds if escalation does take place. Because US assets comprise such a large share of China’s (and, to a lesser extent, Russia’s) foreign reserves, the Chinese are increasingly worried that such assets could be frozen through US sanctions (like those already used against Iran and North Korea).

Of course, dumping US Treasuries would impede China’s economic growth if dollar assets were sold and converted back into renminbi (which would appreciate). But China could diversify its reserves by converting them into another liquid asset that is less vulnerable to US primary or secondary sanctions, namely gold. Indeed, both China and Russia have been stockpiling gold reserves (overtly and covertly), which explains the 30% spike in gold prices since early 2019.

In a sell-off scenario, the capital gains on gold would compensate for any loss incurred from dumping US Treasuries, whose yields would spike as their market price and value fell. So far, China and Russia’s shift into gold has occurred slowly, leaving Treasury yields unaffected. But if this diversification strategy accelerates, as is likely, it could trigger a shock in the US Treasuries market, possibly leading to a sharp economic slowdown in the US.

The US, of course, will not sit idly by while coming under asymmetric attack. It has already been increasing the pressure on these countries with sanctions and other forms of trade and financial warfare, not to mention its own world-beating cyberwarfare capabilities. US cyberattacks against the four rivals will continue to intensify this year, raising the risk of the first-ever cyber world war and massive economic, financial, and political disorder.

Looking beyond the risk of severe geopolitical escalations in 2020, there are additional medium-term risks associated with climate change, which could trigger costly environmental disasters. Climate change is not just a lumbering giant that will cause economic and financial havoc decades from now. It is a threat in the here and now, as demonstrated by the growing frequency and severity of extreme weather events.

In addition to climate change, there is evidence that separate, deeper seismic events are underway, leading to rapid global movements in magnetic polarity and accelerating ocean currents.. Any one of these developments could augur an environmental white swan event, as could climatic “tipping points” such as the collapse of major ice sheets in Antarctica or Greenland in the next few years. We already know that underwater volcanic activity is increasing; what if that trend translates into rapid marine acidification and the depletion of global fish stocks upon which billions of people rely?

As of early 2020, this is where we stand: the US and Iran have already had a military confrontation that will likely soon escalate; China is in the grip of a viral outbreak that could become a global pandemic; cyberwarfare is ongoing; major holders of US Treasuries are pursuing diversification strategies; the Democratic presidential primary is exposing rifts in the opposition to Trump and already casting doubt on vote-counting processes; rivalries between the US and four revisionist powers are escalating; and the real-world costs of climate change and other environmental trends are mounting.

This list is hardly exhaustive, but it points to what one can reasonably expect for 2020.

Financial markets, meanwhile, remain blissfully in denial of the risks, convinced that a calm if not happy year awaits major economies and global markets.

Nouriel Roubini, Professor of Economics at New York University's Stern School of Business and Chairman of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com.