Halloween has long been my favorite holiday. There’s a raw, emotional honesty that comes from all the disguises.
But while I love the devious, slightly wry fun of a good adult Halloween party, it’s been a long time since I felt the chilling fear of a child’s scary Halloween.
And I bet the same is true for you.
So today, we’re going to explore the scariest financial dangers facing the world today. With an extra dose of paranoia — in celebration of the holiday.
These horrors may feel far removed from your everyday life, like the things you read about or see on the news.
But believe me — these scary situations can very easily affect your personal financial well-being. As you’ll see in a moment…
Scary Situation No. 1: Trade Wars!
If you think the trade wars have been cooling down, think again.
Sure, there have been pleasant cooing sounds coming out of recent negotiations between China and the U.S.
But we’ve seen this movie before. Don’t trust it.
Part of the problem is there isn’t a clear U.S. goal in negotiations. Even when trade reps think they’ve hammered out a few nice compromises, everything gets ripped apart once the upper echelon of policymakers get involved.
It’s happened time and again. And there’s no reason to think it won’t happen now.
Even if it doesn’t, the points of agreement are few and not that consequential. The biggest issues — the tariffs on both sides, copyright protections, corporate espionage — are no closer to being agreed upon.
Until they are, don’t expect any real progress to the trade war. A few months without escalation would be nice… but we’re a far way off from seeing a true cessation of hostilities.
And — with China suffering black eye after black eye in Hong Kong and Trump facing huge political problems at home — neither side is in a position to give much ground. Both want to appear strong for domestic audiences.
Not to mention the trade war we’ve started with the European Union. Plus the threats we’ve made — and in some cases carried out — against Canada and Mexico.
When you’re fighting with all your major international trade partners, that’s not good. And the downtick in demand is starting to show up in weakening economic numbers — like projected GDP growth.
Or manufacturing production… which is currently shrinking for the first time in three years.
Scary Situation No. 2: As China Goes…
While the U.S. economy is slowing, the trade war is hitting China even harder.
The official numbers — which are most likely inflated — show China’s GDP growth dropping below 6%.
That might not sound so bad, but for a country that’s in the middle of modernizing like China — with hundreds of millions of people still coming into the economy off subsistence farms — anything below 6% growth can’t keep up with the new workers coming into the workforce.
In other words, for all intents and purposes, China is entering a recession.
And when the world’s second-largest economy goes into recession, that will ripple around the globe.
Expect to see lots of other countries announcing unexpected GDP misses. It’s already happening: Germany has seen business confidence plummet to its lowest level in seven years and the country is most likely already in a recession.
(Recessions only get announced after they’ve started — once enough data have been collected, collated and analyzed. But we know Germany has seen GDP shrink in numerous recent quarters.)
If we’re lucky — we’ll only be looking at a mild worldwide recession. One which, frankly, is overdue.
If we’re unlucky — and outside factors like trade wars lean us in this direction — we could be headed for a long fall off a tall cliff.
Scary Situation No. 3: Tinderbox: Earth
Forget trade wars — how about actual wars?
Yes, yes — there are always wars going on… and the globe keeps spinning.
But what’s happening right now is different. This is closer to the time just before the start of WWI than it is to anything that happened in the Cold War. Tensions are rising everywhere, and sooner or later something is going to snap.
- Russia has been fighting in Ukraine more or less nonstop ever since the annexation of Crimea
- North Korea just tested a submarine-based ballistic missile — which means, theoretically, the Hermit Kingdom could land a nuke on any city in the world. If not now — and it sounds like the first test was a failure — then soon
- Saudi Arabia is murdering journalists — at home and abroad — while stealing wealth from out-of-favor royalty, fighting an ugly proxy war in Yemen and trying to topple Iran
- Iran is, either directly or through proxies, taking aim at Saudi oil production. And instigating violence around the region — most especially in Iraq and Yemen
- Israel still doesn’t have a prime minister — even after a second election. Meanwhile, if Netanyahu does somehow retake the mantle, he’s said he’d annex parts of the West Bank. Expect nonstop violence in that part of the world should he do so.
And we haven’t even talked about America’s longest war ever — Afghanistan.
Before the ceasefire — we’ll see how long that lasts and how Russia and Turkey administrate the area — Secretary of State Mike Pompeo was actually musing to the press about attacking Turkey.
A NATO ally. What could go wrong?
Oh yes, and the fifth-largest country in South America, Venezuela, is basically a failed state at this point — a failed state with plenty of oil. Expect the fighting over Venezuela to get even nastier sooner rather than later.
Actually, it’s already nasty. Expect it to get apocalyptic.
Now, all of these situations could wind up being isolated and contained.
But one could just as easily spark a global war larger than anyone imagines. Just as a single assassination brought about WWI.
There are lots of balls in the air right now. Depending which one eventually gets dropped, any of these conflicts escalating could bring the world economy to its knees.
Scary Situation No. 4: Brexit Insanity
Remember how worried everyone was that Greece could cause a domino effect if it defaulted on its debt? Maybe destroy the financial situation of all of Europe — maybe worse?
Well, the GDP value of Greece is about 0.35% of the world economy.
The GDP of Britain is 4.23% of the global economy — about 12 times as large as Greece’s.
And if you think Brexit doesn’t threaten Britain’s solvency, you haven’t been paying attention.
As I write this, the Brexit can looks to have been kicked farther down the road. Today was the original (revised) deadline for a deal.
But it doesn’t look like we’re getting any closer to a resolution. Feels like a no-deal Brexit is at least as likely an outcome as anything else.
That would be a lot worse than anyone seems to realize. A no-deal Brexit could cause Britain’s GDP to shrink 8% — overnight.
That might not sound huge… just like a 2-degree change in average global temperature doesn’t sound huge.
But both would be cataclysmic events.
Because Brexit isn’t just bad news for Britain — I think it would be a Lehman moment for sovereign debt.
Once Britain can’t pay its obligations — and they won’t come close with that kind of shock — other countries that are owed money won’t have it to pay off their debts… and the defaults will fall like dominoes.
Only one problem: When Lehman Bros. went belly up and threatened major financial institutions around the world, governments could step up and bail them out.
No one can bail out insolvent governments.
Now, I don’t know what a world of ever-expanding government bankruptcies and defaults would look like. But I do know one thing.
It sure is a scary thought.
Editor-in-chief, Unconventional Wealth
P.S. The best hedge against any number of scary financial realities — including those discussed here today — is a healthy allocation of precious metals. Our partners at Hard Assets Alliance make it a cinch to add precious metals, from gold and silver to platinum and palladium, to your portfolio. Check out what other perks they offer here.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...