What's up crypto's monthly economic and geopolitical risk assessment report, November 2024
As the world enters 2024, the global landscape remains rife with uncertainty, shaped by shifting geopolitical tensions, economic instability, and the looming threat of environmental disruptions. In this volatile climate, the potential for Black Swan events—rare, unpredictable occurrences with profound impacts—has never been more pronounced. From the possibility of a global banking crisis to the rise of a catastrophic cyberattack on critical infrastructure, the risks are diverse and complex.
This report aims to assess the likelihood of various Black Swan events over the next 12 months, examining the macroeconomic indicators and global developments that could give rise to such unforeseen challenges. By evaluating these scenarios and their potential ramifications, we aim to provide insights that could help businesses, policymakers, and individuals better prepare for the unexpected. While the chances of these events occurring may seem low, the consequences of their occurrence are severe enough to warrant careful attention.
A Black Swan event is characterized by its rarity, severe impact, and the widespread belief that it was predictable in hindsight. Given the current global landscape, several potential Black Swan events could significantly affect the macroeconomy in the coming year.
Below is an analysis of these events, along with estimated probabilities.
1. Global Banking Crisis
- Description: A sudden collapse of major financial institutions leading to widespread economic turmoil.
- Rationale: Recent events, such as the 2023 United States banking crisis, have exposed vulnerabilities in the global banking system. The International Monetary Fund (IMF) has highlighted rising risks, including potential financial instability and geopolitical tensions, which could exacerbate vulnerabilities in the banking sector.
- Probability: 15%-20%
2. Major Cyberattack on Critical Infrastructure
- Description: A coordinated cyberattack disrupting essential services like energy grids, water supply, or financial systems.
- Rationale: The increasing frequency and sophistication of cyberattacks pose significant risks. A successful attack on critical infrastructure could have devastating economic and social consequences.
- Probability: 10%-15%
3. Escalation of Geopolitical Conflicts Leading to Trade Wars
- Description: Intensified geopolitical tensions resulting in widespread trade restrictions and economic sanctions.
- Rationale: Ongoing conflicts, such as the war in Ukraine, and rising tensions between major economies like the U.S. and China, could lead to significant disruptions in global trade. The IMF has warned of the detrimental effects of escalating trade tensions on global economic stability.
- Probability: 15%-20%
4. Sudden and Severe Climate Event Impacting Global Supply Chains
- Description: A catastrophic climate event, such as a superstorm or massive flooding, disrupting global supply chains.
- Rationale: The increasing frequency of extreme weather events due to climate change poses a significant risk to global supply chains. Such an event could lead to widespread shortages and economic disruptions.
- Probability: 12%-15%
5. Rapid and Uncontrolled Spread of a New Pandemic
- Description: The emergence of a novel infectious disease causing widespread illness and death.
- Rationale: While the world is better prepared than during the COVID-19 pandemic, the possibility of a new, highly contagious disease remains a concern. The World Health Organization continues to monitor potential threats.
- Probability: 8%
6. Sudden Collapse of a Major Economy
- Description: The unexpected economic collapse of a significant global economy, such as China or the European Union.
- Rationale: Economic slowdowns in major economies, like China, have been observed. The IMF has noted that China's growth is expected to be 4.8% this year and 4.5% in 2024, with inadequate stimulus measures cited as a concern.
- Probability: 5%
Bottom line
While the likelihood of any single Black Swan event occurring within the next 12 months remains reasonably low, the cumulative risk of multiple events happening simultaneously or in quick succession could have a profound impact on the global economy. It is crucial for policymakers, businesses, and individuals to remain vigilant and prepared for such unforeseen events. It is our assessment that:
major cyber attack on banking or financial system
banking crises
geopolitical conflict
are the events, with the highest current probability of happening within the next 12 months.