Ace economist Nouriel Roubini of New York University and his colleagues at
Roubini's Edge, a free web site for individual investors, have put together a list of the top five risks for the global economy next year.
- Eurozone crash. "With a very real risk of deflation looming, the eurozone might become a destabilizing force in the global economy," the Roubini team writes.
- Another bout of weakness in Japan. "Abenomics may be backfiring, squeezing consumers, increasing economic hardship, and causing Japanese corporations to give up on their domestic market."
- An economic slowdown in China. "China’s financial system is exhibiting signs of significant stress. If its economic growth slows too much, it will severely affect commodities and trade-driven economies, like the U.S."
- "Geopolitical risks abound." That includes Russia and the Mideast.
- The dollar's rise. "The recent strengthening in the dollar is viewed as a positive by most Americans, but the dollar’s upside could be limited by the crushing effect it has on emerging markets." The greenback has hit a seven-year high against the yen and a two-year high against the euro this month.
Meanwhile, Wolfgang Koester, CEO of currency research firm FiREapps, says the ruble's plunge — it has dropped 44 percent against the dollar since the beginning of the year — endangers the global financial system.
"The downward spiral of the Russian ruble has exacerbated global currency volatility, and it has a contagion effect,"
he writes on CNBC.com.
For example, the ruble move should reinforce Japanese Prime Minister Shinzo Abe's determination to devalue the yen, Koester says.
"The threat of a race-to-the-bottom, beggar-thy-neighbor currency war is very real," he writes.
"The contagion also exposes continuous fundamental weaknesses in global markets. Structural weaknesses in the eurozone, for instance, portend further declines for the euro."
Related Stories: