Citi economist William Lee is out with an evaluation of how the global economy has changed in the past few years. If there’s one thing he’s learned from the financial crisis, it’s that nothing is as safe as it looks in an increasingly interconnected world.
From the note:
“Powerful global forces have heightened uncertainty, raised the riskiness of almost all asset classes, and exposed vulnerabilities in sovereign fiscal positions as well as in banks and financial markets. We can no longer use the terms “perfectly safe” or “absolutely riskless” to describe assets, countries, or political/social institutions.
Here’s an illustrative example, the global impact of a full on European credit crisis, which he describes as one of the principal sources of global risk. It would be very bad indeed, slamming output by as much as 3 per cent for the world’s biggest economies.
Photo: Citi Investment Research & Analysis