photo: International Monetary Fund
I’m very excited about the relaunch of my Roubini EconoMonitor blog. As we begin to ramp up for a full relaunch of the Roubini EconoMonitor platform later this fall, I’ve been thinking a great deal about the content of this website and why it matters so much to me.
The relaunch of the EconoMonitor blog is inspired partly because the world of global macro, financial markets, and geopolitics are fascinating subjects for investors and people in financial services to read about.
However, my enthusiasm for this platform has a broader and far more important reason. In our complex and interconnected world, when we ignore what’s going on outside of our borders, we do so at our own peril. What’s happening in China, what’s happening in Europe, what’s happening in emerging markets, affects the lives of everyone.
During the past summer, there was a great deal of fear and uncertainty about the economic and political situation inside of Greece. Greece is a relatively small country that represents less than 2% of the eurozone’s GDP, yet people worried that a Greek exit — a Grexit — would be the beginning of the end of the eurozone. A chain reaction, a kind of domino effect, that would unravel the political and economic ties in throughout the eurozone. Many worried that a Greek exit from the eurozone could lead, for example, to a British exit from the European Union.
Later in the summer, there were worries about China, the second largest economy in the world. The fears focused on China nearing a so-called hard landing, where the Chinese economy would rapidly decelerate and move toward recession. Fears about China led to a massive risk-off episode where stock markets fell globally, at their peak, by more than ten percent.
Also weighing on financial minds are worries that the collapse of commodity prices, such as oil, could lead to many emerging markets going belly up. If emerging markets and China go belly up, then the world could experience a global recession, or a global financial crisis, which would affect the United States greatly.
In the West, it is only too easy for us to believe that our lives are lived in a bubble — that we are sheltered from the events that unfold elsewhere in the world. In the wake of an event like the terror attacks in Paris, Western democracies may be briefly shocked out of their domestic reverie, but it is rare for a sustained sense of engagement with the world to endure. When we choose to look only inward, we can become complacent, lulled into the mistaken belief that the impact of what’s happening in the Middle East or Greece or China or Sub-Saharan Africa will not be felt here at home.
But no man is an island. In our global hyper-connected world, events that occur in China, Greece, and Russia have ripples that wash through all of our lives. Even if you are not interested in the events unfolding in the burning Middle East, the economic, financial, and security implications still affect you in every corner of the world. (Our friends in Europe are now discovering this in a visceral way, as millions of migrants from the Middle East are coming to their shores.)
Even if you are not invested abroad, a significant financial meltdown in, say, China that leads to a 20% correction, effectively a bear market in U.S. equities, will clearly affect investors domestically. In that sense, in our interconnected world, there is nowhere to hide. We live in a world in which everyone — in their personal life, in their professional opportunities in their investments — must be aware of the broader context.
And, therefore, the collective conversation about what’s happening in our world becomes more important than ever.