Many people start the New Year full of optimism, but they’re usually just setting themselves up for disappointment. For example, as Barry Ritholtz points out, we should probably accept now that we won’t live up to our resolutions. But why stop there? Why not go ahead and expect the absolute worst, raising the chances we’ll be pleasantly surprised?
In that vein, Satyajit Das presents how the global economy could go horribly wrong this year as central banks tighten financial conditions and markets reel and swoon in response (U.S. stocks started the New Year off with some reeling and swooning today). He warns these conditions risk triggering a series of interlocking “doom loops,” which sound like cool toys your tween nephew got on Christmas but are actually mutually reinforcing weapons of mass financial destruction. These are the collateral doom loop, the hedging doom loop, the sovereign doom loop, the intermediary doom loop and the real economy doom loop. Not as scary as Death, Famine, etc., but still worrisome. Read the whole thing.