Bloomberg's team of economists has issued a stern warning, suggesting that an outright war between Iran and Israel could result in a worldwide economic downturn. With skyrocketing oil prices and plummeting risk assets, such a conflict would inflict a severe blow to global economic growth and increase inflation levels, they cautioned. As the conflict's scale broadens, its impact on the global economy grows more significant than just the regional repercussions.
Global Recession Concerns Stemming from Middle Eastern Conflict
In an article published recently, Bloomberg's economists unfolded a scenario where the ongoing strife in the Middle East could push the world economy into a global recession. The chief emerging markets economist for Bloomberg Economics, Ziad Daoud, and Bloomberg’s global economist, who is also named Ziad Daoud, were among the contributors to the article.
They elaborated that the ongoing tension between Israel and Hamas has the potential to destabilize the world economy and possibly plunge it into recession if more nations become embroiled. The economists underscored the realness of this risk, stating, "A more severe escalation could draw Israel into a direct confrontation with Iran, a known supporter of Hamas, which the US and the European Union have labeled as a terrorist group."
Oil Prices and Global Growth at Stake
The economists predicted that in the case of such a scenario, oil prices might skyrocket to a staggering $150 a barrel and global growth could fall to a meager 1.7% – a recession that would wipe off approximately $1 trillion from global output.
The economists also voiced concerns about the current vulnerability of the world economy, which is still recuperating from an inflation spike triggered by Russia's invasion of Ukraine the previous year. Another war in an oil-producing region could potentially reignite inflation. The wider implications could range from renewed turbulence in the Arab world to influencing the next year's presidential election in the U.S., where petrol prices significantly sway voter sentiment.
Three Potential Scenarios
Bloomberg Economics carried out an analysis to ascertain the potential effects on global growth and inflation under three varying scenarios. Scenario one imagines hostilities mainly confined to Gaza and Israel. In scenario two, the conflict spills over into neighboring countries like Lebanon and Syria, effectively transforming it into a proxy war between Israel and Iran, according to the economists. Scenario three envisions an escalation into an all-out war between the two regional adversaries, Israel and Iran.
The economists emphasized the low probability yet high-risk nature of a direct Iran-Israel conflict. Such a scenario could serve as a catalyst for a global recession, with soaring oil prices and plummeting risk assets delivering a substantial blow to growth and causing inflation to rise.
"In each of these instances, the pattern is consistent — pricier oil, higher inflation, and slower growth — but the extent varies. The more the conflict escalates, the more its impact becomes global rather than regional," they deduced.
We welcome your thoughts on Bloomberg’s economists' warnings about a potential global recession triggered by a Middle Eastern war. Feel free to share your views in the comments section below.
Frequently Asked Questions
What Precious Metals Can You Invest in for Retirement?
Gold and silver are the best precious metal investments. They are both simple to purchase and sell, and they have been around for a long time. Consider adding them to the list if you're looking to diversify and expand your portfolio.
Gold: The oldest form of currency known to man is gold. It is very stable and secure. It's a great way to protect wealth in times of uncertainty.
Silver: Silver has always been popular among investors. It is an excellent choice for investors who wish to avoid volatility. Silver tends to move up, not down, unlike gold.
Platinium: Platinum is another form of precious metal that's becoming increasingly popular. It's resistant to corrosion and durable, similar to gold and silver. It's however much more costly than any of its counterparts.
Rhodium – Rhodium is used to make catalytic conversions. It is also used as a jewelry material. And, it's relatively cheap compared to other types of precious metals.
Palladium – Palladium is an alternative to platinum that's more common but less scarce. It's also much more affordable. It is a preferred choice among investors who are looking to add precious materials to their portfolios.
Are gold investments a good idea for an IRA?
If you are looking for a way to save money, gold is a great investment. You can also diversify your portfolio by investing in gold. There's more to gold that meets the eye.
It has been used as a currency throughout history and is still a popular method of payment. It's sometimes called “the world's oldest money”.
Gold, unlike other paper currencies created by governments is mined directly from the earth. This makes it highly valuable as it is hard and rare to produce.
The price of gold fluctuates based on supply and demand. If the economy is strong, people will spend more money which means less people can mine gold. This results in gold prices rising.
The flip side is that people tend to save money when the economy slows. This increases the production of gold, which in turn drives down its value.
It is this reason that gold investing makes sense for businesses and individuals. You will benefit from economic growth if you invest in gold.
You'll also earn interest on your investments, which helps you grow your wealth. You won't lose your money if gold prices drop.
What Should Your IRA Include in Precious Metals?
It's important to understand that precious metals aren't only for wealthy people. You don’t need to have a lot of money to invest. You can actually make money without spending a lot on gold or silver investments.
You might think about buying physical coins such a bullion bar or round. Shares in precious metals-producing companies could be an option. Another option is to make use of the IRA rollover programs offered by your retirement plan provider.
You'll still get the benefit of precious metals no matter which country you live in. Even though they aren't stocks, they still offer the possibility of long-term growth.
And, unlike traditional investments, their prices tend to rise over time. If you decide to make a sale of your investment in the future, you will likely realize more profit than with traditional investments.
Can I buy gold with my self-directed IRA?
However, gold can only be purchased with your self-directed IRA. To do so, you must first open a brokerage account at TD Ameritrade. If you have an existing retirement account, you can transfer funds to another one.
The IRS allows individuals up to $5.500 annually ($6,500 if you are married and filing jointly). This can be contributed to a traditional IRA. Individuals can contribute up $1,000 per annum ($2,000 if they are married and jointly) directly to a Roth IRA.
You might want to purchase physical bullion, rather than futures contracts if you are going to invest in gold. Futures contracts can be described as financial instruments that are determined by the gold price. These financial instruments allow you to speculate about future prices without actually owning the metal. But physical bullion refers to real gold and silver bars you can carry in your hand.
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
Investing in gold or stocks
It might seem risky to invest in gold as an investment vehicle these days. This is because many people believe gold is no longer financially profitable. This belief arises because most people believe that the global economy is driving down gold prices. They feel that gold investment would cause them to lose money. In reality, however there are still many significant benefits to gold investing. Below we'll look at some of them.
Gold is one of the oldest forms of currency known to man. There are records of its use going back thousands of years. It was used all around the world as a reserve of value. It's still used by countries like South Africa as a method of payment.
You must first decide how much you are willing and able to pay per gram to decide whether or not gold should be your investment. It is important to determine the price per gram you are willing and able to pay for gold bullion. If you don’t know the current market rate for gold bullion, you can always consult a local jeweler to get their opinion.
Noting that gold prices have fallen in recent years, it is worth noting that the cost to produce gold has gone up. So, although gold prices have declined in recent years, the cost of producing it has not changed.
Another thing to remember when thinking about whether or not you should buy gold is the amount of gold you plan on purchasing. If you intend to only purchase enough gold to cover your wedding rings it may be a smart decision to not buy any gold. This is not a wise decision if you're looking to invest in long-term assets. If you sell your gold for more than you paid, you can make a profit.
We hope that this article has helped you gain a better understanding and appreciation for gold as an investment option. We recommend you do your research before making any final decisions. Only then will you be able to make an informed decision.
By: Kevin Helms
Title: Global Recession Threat: Economists Highlight Risks of Direct Iran-Israel War
Sourced From: news.bitcoin.com/economists-warn-direct-iran-israel-war-could-trigger-global-recession/
Published Date: Fri, 20 Oct 2023 04:00:03 +0000