As Mark Twain never said, “It ain’t what you don’t know that gets you into trouble. It’s what you think you know for sure that just ain’t so.”
Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change.
They will include
- a growth recession in China,
- a rise in global long-term real interest rates and
- – a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.