Global recession and financial crisis could hit if the Israel-Hamas war pulls in the US and Iran, Wall Street veteran says
Business Insider
- The Israel-Hamas conflict may trigger a global recession and financial crisis, Jim Rickards says.
- The US economy is already slowing as people's savings dwindle and credit-card bills grow, he says.
- The Wall Street veteran flagged the risks of rising oil prices, weaker demand, and de-dollarization.
If the Israel-Hamas conflict spreads, it could spark a worldwide downturn and financial catastrophe, one Wall Street veteran has warned.
Israel is currently bombing Gaza and preparing to launch a ground invasion in retaliation for Hamas slaughtering around 1,300 civilians and taking 150 hostages in a surprise assault on October 7. The Lebanese militant group Hezbollah and Iran might wade into the fight against Israel and drag the US into the war, Jim Rickards recently told "The Julia LaRoche Show."
"Those are the things that are really going to tip the global economy into a global recession, if not a financial crisis," said the former Citibank and Long-Term Capital Management employee and the author of "Currency Wars: The Making of the Next Global Crisis."
Rickards noted the American economy already seems to be flagging. US consumers have "slammed on the brakes" in recent weeks, as they've virtually exhausted their pandemic savings and have racked up onerous amounts of credit-card debt, he said.
That may explain why gasoline consumption has dropped in the past couple of months, which tends to be a "really negative economic sign," the editor of the "Strategic Intelligence" financial newsletter said. Softer demand might explain why oil prices haven't surged since the breakout of the Israel-Hamas battle, which has stoked fresh supply concerns, he added.
Brent and West Texas Intermediate crude are both trading below $90 currently. They could spike to $120 or $150 if the latest Middle-Eastern war escalates, Rickards said. The prospect of surging oil prices, combined with weaker consumer spending and the continued headache of the Russia-Ukraine conflict, bodes poorly for US growth, he added.
Rickards also rang the de-dollarization alarm, accusing the American government of "destroying the dollar" by overusing economic sanctions. He pointed to the nation's decision to freeze Russia's dollar reserves as punishment for its invasion of Ukraine, and warned that could spur other countries to develop alternative currencies and dump the greenback to avoid a similar fate.
"We weaponize the dollar, you should expect that trading partners are going to weaponize back," he said. "We're losing the financial war in Ukraine, we're losing the financial war to the BRICs," he continued, referring to Brazil, Russia, India, China, and South Africa.
Rickards isn't the only expert sounding the alarm on the Israel-Hamas conflict. Ray Dalio, a billionaire investor and economic historian, recently pegged the probability of a world war at 50% in the next decade.
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