There are few threats greater to the global financial system than the expanding interconnectedness and dependence between economies around the world. In today’s world, the economic challenges faced by one country can create a tidal wave of problems worldwide due to the interconnectedness of global stock markets and banks. In recent years counterparty risk in the financial system has increased exponentially, with derivative markets growing to $700 trillion, an all-time high and ten times the size of the global economy.
The issue is that most developed world economies all face major headwinds that could cause sudden economic paralysis and spread globally. These issues include debt-ridden governments and consumers; austerity hampering economic growth at a time where growth is difficult to find; over leveraged banks, despite government bailout efforts; and very high unemployment levels that cost societies greatly due to lower tax revenues, increased government cost for social programs and poor psychology. The following outlines the most concerning economic environments around the globe.
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