The world is in panic mode now. The United States and the eurozone, which both face enormous challenges, make up 50 percent of the world’s GDP. If either of their economies crash, the whole world economy will collapse.
In 2008, after the collapse of Lehman Brothers, the world had the worst economic crisis since the Great Depression.
This crisis could be worse as the governments on both sides of the content have run out of money to prop up failing sovereign states (in Europe countries like Italy and Spain, and in America some of the 50 states in a literal sense).
China, India, Brazil, Australia, Canada are all other huge economies that are experiencing problems, and any recession could cause a ripple effect across the world.
There is one country that is discussed slightly in the political media, but almost never in regard to economic news.
The biggest threat to the global economy could be Saudi Arabia.
Saudi Arabia has had a bi-polar relationship with America for decades. They supply us oil and we protect their Islamist Monarchy. When President Barack Obama called for Mubarak (former president of Egypt) to step down, Saudi Arabia was furious at Obama, since Mubarak was the main ally in the region against Iran.
Saudi Arabia has now looked for other allies in the region, and there have been many reports that Saudi has helped the rebels in the rebellion against President Bashar Assad of Syria, who is a strong ally of Iran.
Recently Pakistan and Saudi Arabia have been increasing ties. There are reports that if Iran attacks Saudi Arabia, Pakistan will respond possibly with nuclear weapons.
This war could very easily get out of hand and spread to Syria, the Gulf States, Turkey, Israel, Egypt, Jordan, Iraq, and east towards China, Afghanistan, and possibly America.
Aside from this possibility, which will result in the skyrocketing price of oil, a war with five nuclear powers; America, Iran, Pakistan, China and Israel would be a lot bigger problem for the world economy than Greece defaulting on its debt.
As bad as the problems are here and in Europe; President Obama through his inept and amateurish foreign policy has created a huge powder keg in the middle east that could start a third world war.
This would cause a tanking of equities across the world and almost every other asset class. American treasury bonds would likely be the safest asset. Gold has had a huge run but likely would be a great performer in this situation.
When people at cocktail parties talk about the problems facing the United States, Europe, China and many of the other countries mentioned earlier, mention Saudi Arabia to impress them.
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