The risks of depression remain high along with sovereign default and hyper-inflation, says consultants Towers Watson.
“The risk of depression is what we’re most worried about,” says Tim Unger, head of investment strategy Australia at Towers Watson. “There are concerns governments and central banks are running out of options and if forced to conduct austerity options they run the risk of global growth collapsing.”
Unger defines depression as a prolonged period of low or zero growth, high unemployment and deflation.
He says the risk of a major sovereign default in Europe, France, Italy or Spain, is Towers Watson’s No. 2 global risk. Hyperinflation because central banks have flooded the world with liquidity in the hopes of kick starting investment, employment growth and demand, is the consultants’ No.3 risk., says Unger.
With depression and deflation along with hyper-inflation as part of Towers Watson’s top three risks shows what a precious situation the world is in, he says.
“These are long-term problems that will take not months but years to work out,” says Unger. “The risk is that there will not be strong or bold leadership to address them.”