Should we have predicted Black Swan events like COVID and the war in Ukraine? Where is the next crisis coming from?

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Who predicted the 2008 global financial crash? COVID? The war in Ukraine?

Of course, some did. Hollywood gave us a taste of a global respiratory pandemic in the 2011 film, Contagion.

Some economists saw the unravelling of the financial markets and the ensuing recession long before it happened.

And we should all have seen Vladimir Putin’s war coming. He had already annexed Crimea, he massed troops on the border for months and kept warning he would strike.

But even if we should know, we often don’t want to know. We certainly don’t prepare.

These events are what statistician Nassim Taleb popularised as “Black Swans”. Why? Because they are outliers. They have extreme impact. What’s more, we are all wiser after the event, concocting explanations that make it all seem so predictable.

Russian President Vladimir Putin listens to members of his military.
Vladimir Putin had warned for months he intended to strike Ukraine yet when he did few were prepared.(Reuters: Russian Defence Ministry)

Another pandemic was always going to happen. We had trial runs with SARS and Swine Flu. How we had erased the history of the so-called “Spanish Flu” pandemic that killed more people than World War I.

Financial crash? Well, Asia’s markets collapsed a decade before the GFC.

Let’s not forget the Great Depression.

War? When has the world not been at war?

‘Black Swan’ events are not so rare

But these recent Black Swan events reshaped our world. The best laid plans were reduced to dust. People die. Businesses are ruined. Livelihoods and homes are lost.

We live in a world now where Black Swans are not so rare.

Climate change has made weather catastrophes a regular occurrence.

The world has never properly recovered from the financial crash; it left in its wake gross wealth inequality and that is now baked in.

Economic upheaval has upended politics, seeing the return of the political strongman, and democracy is in a spin. We have just had a federal budget at a time when the global economy is being ransacked by runaway inflation and major economies are going backwards.

Smoke billows from the Churchill bushfire in the Gippsland region of Victoria
Climate catastrophes are becoming more common.(whatthe41: User submitted via ABC Contribute)

The International Monetary Fund says we should expect things to only get worse.

Black Swans, Taleb says, are outside the realm of regular expectations. So where are they hiding?

A global recession. The World Bank and the IMF are ringing the alarm bells. It would not be unexpected, a recession is hiding in plain sight. The Black Swan is inflation and it is already here.

Treasurer Jim Chalmers calls it public enemy number one. Is it truly a Black Swan? Well, it is not entirely outside the realm of expectations.

But we did not see inflation coming and, like the 2008 crash, COVID or the Ukraine war, if we did it see it we didn’t want to — and we did not act.

Reassurance has been swapped for the wrecking ball

Remember the Reserve Bank not that long ago was reassuring home buyers that interest rates would not be going up.

Tell that now to families paying $800 more each month for a $500,000 mortgage.

Interest rates will keep rising while ever inflation keeps raging.

It is a blunt instrument and, for families, a wrecking ball. The Treasurer has said the indebted and the poor will bear the burden.

They will have to stretch the family budget to pay for food, fuel, electricity and hope to hold onto their homes.



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