Probability: 55-45.

10. Gray Swan: 

A China reckoning/ world financial crisis: A perfect storm involving a simultaneous slowdown in the three economic centers could catapult the global economy into another deep economic crisis. China’s internal contradictions are growing, including massive public, household, and corporate debt (300 percent of gross domestic product), aging demographics (labor shortages, pension, and healthcare demands), and sagging growth (two to three percent in real terms). The United States also suffers from a growing debt problem at the Federal government level, plus substantial corporate debt at a time of record low-interest rates. The US Federal Reserve worries its fiscal and monetary instruments may not be up to the job for dealing with even just a recession. Equally, slowing growth and the EU’s divisions in the wake of its uneven recovery from the 2008 financial meltdown make it an unlikely candidate to pull the world out of a recession. This would be more dangerous than 2008, as central bank cooperation and US Congressional action are more problematic.  

Probability of a world financial crisis in 2020: 35-65

Robert A. Manning is a senior fellow with the Scowcroft Center for Strategy and Security and its Strategic Foresight Initiative at the Atlantic Council.

Dr. Mathew J. Burrows serves as the director of the Atlantic Council’s Foresight, Strategy, and Risks Initiative in the Scowcroft Center for Strategy and Security.

Image: Reuters.