A Pessimist's Guide to the World: Here's Everything That Could Go Wrong in 2016

By Flavia Krause-Jackson, Javier Blas
December 14, 2015 — 10:00 PM EST

On a clear March night in Iraq, the desert plain of the Faw peninsula and a Kurdish village near Syria and Turkey go up in flames. The next morning, Islamic State claims responsibility for the destruction of the country’s major oil pipelines.

The world immediately loses 3.5 million barrels of daily exports. As Iraq struggles with repairs, violence erupts in the oil-rich region of the Niger Delta, Algeria descends into chaos on the death of its president and there’s a coup in Venezuela. Bloated inventories protect the global economy for a while, but the industry is operating with the thinnest capacity cushion in years. Crude eventually tops $100 a barrel. The Federal Reserve reverses its rate-raising policy to avert a global recession.

Impossible or plausible?

Investors can’t ignore this or other so-called Black Swan scenarios following a year that surprised the world with record refugee flows and brutal terror attacks. In 2016, unexpected events will take on heightened importance as the Fed ends an era of ultra-cheap credit. Markets will lose the cushion that’s shielded them from geopolitical shocks such as the Arab uprisings and the annexation of Crimea.
Little Ammunition

“There is very little ammunition that can be applied to mitigate these kinds of risks," said Tina Fordham, Citigroup Inc.’s chief global political analyst. "Central banks still have the most bullets and we have already crossed the Rubicon into extraordinary measures.”

From a maverick winning the U.S. presidential election to Britons voting to quit the European Union to hackers bringing down Wall Street, Bloomberg discussed a range of high-impact events with dozens of former and current diplomats, economists, investors, geopolitical strategists and security consultants. The scenarios, also presented in this interactive graphic, were reviewed and ranked by 119 economists in a survey.


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http://www.bloomberg.com/news/articles/2015-12-15/imagine-a-world-where-black-swans-really-do-come-true-in-2016