In such a vulnerable world, it would not take much to spark the crisis of 2020. Notwithstanding the risks of playing the fool’s game, three “Ps” are at the top of my list of concerns: protectionism, populism, and political dysfunction. An enduring tilt toward protectionism is particularly troubling, especially in the aftermath of a vacuous “phase one” trade accord between the US and China. Prime Minister Narendra Modi’s “Hindu nation” crusade in India could well be the most disturbing development in a global swing toward populism. And the great American impeachment saga takes Washington’s political dysfunction further into uncharted territory.
Quite possibly, the spark will be something else – or maybe there won’t be any shock at all. But the diagnosis of vulnerability needs to be taken seriously, especially because it can be validated from three perspectives – real economies, financial asset prices, and misguided monetary policy. Throw a shock into that mix and the crisis of 2020 will quickly be at hand.
Stephen S. Roach, former chairman of Morgan Stanley Asia and the firm's chief economist, is a senior fellow at Yale University's Jackson Institute of Global Affairs and a senior lecturer at Yale's School of Management. He is the author of "Unbalanced: The Codependency of America and China."