Wednesday, August 6, 2014

The Global Hotspots - Not Cooling Off Yet

While there is a tentative truce between Isreal and Hamas, the Ukraine is still a hotspot with potential to escalate. And the situation with ISIS in Iraq and now neighboring countries is getting even hotter. If the Middle East erupts into widescale conflict, oil prices come into play. And ISIS  seems willing to use control of water supplies as a strategic weapon as well.

Here are some of the latest news articles on the hotspots:

Isreal and Hamas Truce Begins

It's impossible for us to analyze all the reasons why these areas are in conflict. But it is clear that there is a lot of tension globally and that it could escalate in these hot spot areas at any time. Escalation can lead to an impact on energy prices and global trade. There are derivatives tied to energy prices. Again, the world is very interconnected so a problem anywhere can lead to a problem everywhere. 

So far these conflicts seem like regional issues that have not greatly impacted the global fianancial system. But there are large super powers lurking in the background of all these conflicts. They always move to protect their own interests so we have to stay alert to all these areas of conflict. 

Economic forecasts for GDP usually do not factor in geo political problems. It is a real unknown how all the sanctions will impact GDP. A coalition of some nations that would prefer to see the US dollar dethroned as global reserve currency is lurking out there as well. This is why we have to pay attention to all of this. What seems contained today can escalate tomorrow. And escalation can lead to systemic problems very quickly. Just one of the areas we have to stay tuned to.

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