Discover more from Dr. John Rutledge: Far from Equilibrium Economics
CME OpenMarkets: The Risks to Watch in 2023
Autocrats and pandemics are a recipe for social, political, and economic unrest
Summary: As I sat down today to write the piece CME has asked me to contribute the May edition of their OpenMarkets series I realized I had failed to post the last one so here it is with apologies to my subscribers. In January, CME asked me, along with George Magnus from Oxford University, Dana Peterson from the Conference Board, and Blu Putnam, Chief Economist of the CME Group and my friend of 50 years, to give our take on one big risk investors will face in 2023. As you will read below, I was much more concerned about the erratic actions of Xi Jinping, Vladimir Putin, and other autocrats than I am about recession risk. Four months into the year I am sticking with my assessment.
Economist Outlook: The Risks to Watch in 2023
John Rutledge, Chief Investment Strategist, Safanad; CNBC Economics Contributor
"The greatest risk faced by investors in 2023 is the toxic mixture of powerful autocrats and pandemic-fatigued populations. This combination is the real Long-COVID risk we should be worried about.
As we saw with the sudden reversal of Zero-COVID in China, autocracies are prone to abrupt changes in direction at the whim of a single person; we can’t rely on the stabilizing effects of the Central Limit Theorem that makes countries where decisions are shared among a number of people inherently more predictable. Autocracies produce major tail events. Populations are suffering from COVID-induced PTSD, fatigue and mistrust of authorities after three years of pandemic and aggressive government containment policies.
Tail events and PTSD populations are a recipe for social unrest, political upheaval, changes of government and conflict within and among nations.
Perhaps, that is why the many pandemics in history have been followed by prolonged periods of disorder. Both generate spikes in volatility. Neither are good for investors."