Personally I see a number of dangerous issues, barring the usual emerging markets’ debt leverages. It tends to be that some emerging markets get hit heavily but this is just a result of a global recession, not a catalyst. For example, Lehman Brothers in 08’ was the catalyst, the result was that global output contracted and that Iceland went bankrupt. I can identify four possible catalysts, all involving China and/or America.

Trade Wars

Frankly, any time in history that large countries decide to go to war in business, this is never good for global growth. Trump has shot us all, there will be no clear ‘winner’ of this, it will stop once each side has been hit hard enough to warrant backing down. The problem it that we are talking of the two largest economies in the world, but with those economies come an awful lot of ‘hangers on’, like anchor businesses, massive economies support smaller ones. So hitting China to that extent will cause far greater troubles in places like Vietnam, China can pay it’s way, Vietnam as an emerging market needs stability and cash injections, and once those dry up they are looking down the barrel of a gun. This argument holds true for a large number of South East Asian countries that rely on China for business, whom in turn, relies on the States. It should also be noted that the States also relies on China as the largest net buyer of their government bonds, and this has already been raised by the Chinese as a possible retaliation tool. Honestly I see a Trade War as the most glaring catalyst to mark the end of the business cycle with a global contraction.

Chinese Household Debt

Across the board China has been a large borrower when counting from the last recession. No more so than their private debt held by citizens. If anybody could recall, the last issue we had in 08’ was that American households were buying up property that they could not afford, there is really no difference here. All we need is a large enough number of Chinese citizens to default and either cause a run on a bank and/or cause the collapse of a financial institution. Once that happens, other Chinese banks will thus shutter their doors to loans and that will be the precise moment that we are all f***ed. The below graph should demonstrate that such increases in percentages is unsustainable;