Social unrest in India over massive auto industry sector (which employs 30+ million) layoffs (in part due to higher oil prices from US sanctions on Iran and government’s push to ban gasoline-powered vehicles) could also impact India’s tourism industry, which employs millions.
2. Travel and tourism industry contributed a staggering $208 billion to India’s GDP in 2016 (9.6% of India’s total GDP). India had the second highest total tourism GDP contribution in Asia-Pacific, behind China in 2016. In 2016, the sector directly employed 25.4 million people.
3. Everything in India happens on a massive scale due to its population size - a 1% increase in unemployment means tens of millions of lives affected and given the interlocked nature of globalized economies, this has a ripple effect on the US economy too.
4. If 10% of high-middle income consumers in India or China (both big consumers of Iranian oil impacted by sanctions) scale back spending due to high oil prices->sluggish economy->layoffs, that directly impacts US multinational companies (Apple, GE, Proctor & Gamble, Visa)
5. One big head to roll in coming weeks could be Larry Kudlow, who has consistently failed to predict consequences of policies (he famously declared that there would be no recession in December 2007, even as all data pointed to a recession)
6. At the moment, whether the US slips into a recession (and Trump’s political future) hinges on three factors:
1. Economies of India and China picking up pace
2. US-China settling trade disputes
3. Saudis pumping enough oil to offset Iran’s production loss and keep prices low
7. The yield curve (40 basis points inversion) looks a lot like 2007, which dramatically increase odds of US entering a recession within 12 months. The last recession was driven by a spike in price of oil which caused gasoline prices to soar in US triggering mortgage defaults.
8. This time around, Saudis can do only so much to keep oil prices low - low prices hurt the Saudi economy - if Saudis decide enough is enough and cut production to prop up prices, oil could rise again which would be the death knell for economic growth. https://www.bloomberg.com/news/articles/2019-08-07/saudis-are-discussing-options-to-halt-oil-slide-with-producers …
9. Of course, China can respond to the latest round of US tariffs by buying more Iranian crude oil, defying US sanctions, which could trigger more retaliatory US measures - all of which could create more global economic uncertainty. https://www.nytimes.com/interactive/2019/08/03/world/middleeast/us-iran-sanctions-ships.html …
10. Meanwhile, CEO confidence and capital spending have tailed off; US consumers, spooked by fears of layoffs, could scale back spending; since 70% of the US GDP is consumer spending, this could hurtle the economy faster toward (the self-fulfilling prophecy of) a recession.
11. Lost in all the economic data is the toll on humans who are the real engines of the global economy. In Iran, sanctions have hit supply of medicines, which could cause more illnesses, more Iranians to adopt a harsher stance toward the West, strengthening Iranian leadership.
12. In North America and Europe, wild stock market swings and fear of a looming recession could increase anxiety and depression, causing people to work longer hours, avoid vacations, reduce time spent with their families/loved ones and increase dependence on drugs and alcohol.
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