15 Potentially Massive Threats To The U.S. Economy Over The Next 12 Months
March 6, 2012 7:07pm PST
We live in a world that is becoming increasingly unstable, and the potential for an event that could cause “sudden change” to the U.S. economy is greater than ever. There are dozens of potentially massive threats that could easily push the U.S. economy over the edge during the next 12 months. A war in the Middle East, a financial collapse in Europe, a major derivatives crisis or a horrific natural disaster could all change our economic situation very rapidly. Most of the time I write about the long-term economic trends that are slowly but surely ripping the U.S. economy to pieces, but the truth is that just a single really bad “black swan event” over the next 12 months could accelerate our economic problems dramatically. If oil was cut off from the Middle East or a really bad natural disaster suddenly destroyed a major U.S. city, the U.S. economy would be thrown into a state of chaos. Considering how bad the U.S. economy is currently performing, it would be easy to see how a major “shock to the system” could push us into the “next Great Depression” very easily. Let us hope that none of these things actually happen over the next 12 months, but let us also understand that we live in a world that has become extremely chaotic and extremely unstable.
In the list below, you will find some “sudden change” events that are somewhat likely and some that are quite unlikely. I have tried to include a broad range of potential “black swan events”, but there are certainly dozens more massive threats that could potentially be listed.
The following are 15 potentially massive threats to the U.S. economy over the next 12 months….
#1 War With Syria – U.S. Senator John McCain is now publicly calling for U.S. airstrikes against Syria. A military conflict with Syria becomes more likely with each passing day.
#2 War With Iran – A war in the Middle East involving Iran could literally erupt at any time. The following is from a Reuters news report that was issued on Monday….
President Barack Obama appealed to Benjamin Netanyahu on Monday to give sanctions time to curb Iran’s nuclear ambitions, but the Israeli prime minister offered no sign of backing away from possible military action, saying his country must be the “master of its fate.”
#3 A Disorderly Greek Debt Default – Many reporters in Europe seem to think that this is becoming increasingly likely. So what would a disorderly Greek debt default mean for the global financial system? A leaked report that was authored by the Institute of International Finance says that a disorderly Greek debt default would have some very serious consequences. You can read the full text of that leaked report right here.
#4 An Economic Collapse In Spain – Spain has one of the largest economies in Europe and it is rapidly becoming a basket case. As I have written about previously, the unemployment rate in Spain has hit 19.9 percent, and the unemployment rate for workers under the age of 25 is up to 49.9 percent. Unfortunately, the situation in Spain continues to deteriorate. The following is from a recent article by Marc Chandler….
However, the devolution in Spain is particularly troubling. The new fiscal compact had just been signed last week, which includes somewhat more rigorous fiscal rule and enforcement, when Spain’s PM Rajoy revealed that this year’s deficit would come in around 5.8 percent of GDP rather the 4.4 percent target. This of course follows last year’s 8.5 percent overshoot of the 6 percent target.
The problem that for Spain is that the 4.4 percent target was based on forecasts for more than 2 percent growth this year. However, in late February, the EU cuts its forecast to a 1 percent contraction. This still seems optimistic. The IMF forecasts a 1.7 percent contraction, which the Spanish government now accepts.
#5 The Price Of Gasoline – The average price of a gallon of gasoline in the United States has risen for 27 days in a row and is now up to $3.77. Virtually all forms of economic activity are affected by the price of gasoline, and if the price of gas keeps going up it is eventually going to have dramatic consequences for the U.S. economy.
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