FX.co ★ Seven black swans of global economy

Bankruptcy of Lehman Brothers

According to experts the bankruptcy of the largest American bank Lehman Brothers that happened more than a decade ago is a great example of a black swan. It had a negative impact not only on the US but the entire global financial system. In 2008, the bank's liabilities exceeded $600 billion. Having lost all insurances, investors were pulling out of the developing markets and buying up the dollar. The US financial authorities have softened the blow to the world economy stopping the panic at once.

No-deal Brexit

A potential black swan of our times is the UK leaving the EU without a deal, or a no-deal Brexit. The exit date is October 31, 2019. A newly elected British Prime Minister Boris Johnson announced that he is ready for the no-deal Brexit. However, experts believe that such a scenario can lead the UK to a recession. The no-deal Brexit can also affect the EU economy which is now suffering from a global economic decline.

Auto parts tariffs

Escalation of trade tensions between the US and the EU can become another problem of European and global economies. Imposed tariffs on auto parts are one of the issues. On May 17, 2019, the White House administration decided that imports of cars and auto parts pose a threat to the US national security. The car industry saw $128 bln increase in tariffs on imports from the EU and Japan.

US and EU trade tensions

According to experts, continuous trade tensions between the US and the EU are one of the most important black swans. They mainly relate to those metals which are commonly used in industry. In 2018, the US increased tariffs on steel by 25% and aluminium, imported from the EU, by 10%. In response, the countries of the eurozone increased tariffs on US steel by 25%. Recently Washington has imposed restrictions on aircraft supply from Airbus SE. Europe is planning to respond with tariffs against Boeing Co. Escalation of trade tensions between the US and the European Union can have a significant impact on the world economy.

Budget deficit in Italy

Another serious threat to the global economy could be budget deficit in Italy. The third largest economy in Europe can be put under the European Commission’s sanctions in 2020. This year, the country escaped Brussels’ restrictions since failing to reduce budget deficit to an acceptable level. However, the situation may deteriorate. Next year, Italy’s budget deficit will increase to 3.5% of GDP, which is much higher than the acceptable level of 3% established by European rules.

Currency wars

The escalation of currency tensions causes worries among investors and undermines business confidence. It has a negative impact on global markets. In 2019, a stronger dollar became a deterrent to American stocks. The greenback has found support in monetary policy simulations introduced by a number of central banks. The leading regulators have been massively reducing their interest rates. However, US President Donald Trump accused trading competitors, particularly China, in manipulating the exchange rates of national currencies.

Argentina's peso collapse

In mid-August 2019, Argentina's stock market crashed by more than 37% due to the loss of President Mauricio Macri to the opponent Alberto Fernandez in the primary elections. In those circumstances the national currency collapsed against the greenback by almost 20%. Currently, according to experts, the peso is not very stable against the US dollar.