A potential direct conflict between Iran and Israel presents a significant threat to the global economy, warn Bloomberg economists. They suggest that such a war could potentially lead to a worldwide recession due to skyrocketing oil prices and a significant downturn in risk assets. They underline that the broader the conflict gets, the greater its impact on the global economy rather than just the regional one.
The Implications of a Middle East War on the Global Economy
Bloomberg's economic experts recently explored how a Middle East war could trigger a worldwide recession. Ziad Daoud, the chief emerging markets economist for Bloomberg Economics, and his team, have detailed the potential economic repercussions of escalating tensions between Israel and Hamas.
The economists highlighted that the ongoing conflict holds the potential to destabilize the global economy and could potentially plunge it into recession if more nations get involved. The risk, they emphasize, is very real.
A Closer Look at the Potential Consequences
The economists dived into a deeper analysis of this scenario, suggesting that an intensified escalation could lead to a direct confrontation between Iran, which is a supplier of arms and funds to Hamas, and Israel. The United States and the European Union have labeled Hamas as a terrorist group.
In such a situation, they predict a huge leap in oil prices to $150 a barrel, and a steep decline in global growth to 1.7%. This could result in a recession that could potentially wipe off about $1 trillion from the world output.
Vulnerability of the Current World Economy
The world economy, as it stands today, is susceptible. It's still reeling from an inflation spike that was worsened by Russia's invasion of Ukraine last year. Another war in an energy-rich region could reignite inflation. The wider implications could range from a resurgence of unrest in the Arab world to influencing next year's presidential election in the U.S., where fuel prices significantly sway voter sentiment.
Possible Scenarios and Their Global Impact
The Bloomberg Economics team carried out an analysis to evaluate the potential impacts on global growth and inflation under three different scenarios. The first scenario anticipates the hostilities to remain mainly between Gaza and Israel. The second scenario forecasts the conflict extending into neighboring countries like Lebanon and Syria, essentially turning it into a proxy war between Israel and Iran. The third and most dangerous scenario sees a direct war between Israel and Iran.
The economists reiterate that a direct war between Iran and Israel, though low in probability, could potentially trigger a global recession. They predict soaring oil prices and a sharp drop in risk assets that could significantly impede growth and push inflation even higher.
They conclude that regardless of the scenario, the consequences remain the same, albeit with varying degrees of severity. The broader the conflict, the more global its impact, leading to costlier oil, higher inflation, and slower growth.
The warnings issued by Bloomberg's economists about the potential of a global recession due to escalating conflicts in the Middle East are indeed alarming.
Frequently Asked Questions
Is gold buying a good retirement option?
Although gold investment may not seem appealing at first glance due to the high average global gold consumption, it's worth considering.
Physical bullion bars are the most popular way to invest in gold. There are other ways to invest gold. You should research all options thoroughly before making a decision on which option you prefer.
If you don’t have the funds to invest in safe places, such as a safe deposit box or mining equipment companies, buying shares of these companies might be a better investment. If you are looking for cash flow from your investment, buying gold stocks will work well.
ETFs allow you to invest in exchange-traded funds. These funds give you exposure, but not actual gold, by investing in gold-related securities. These ETFs typically include stocks from gold miners, precious metallics refiners, commodity trading companies, and other commodities.
Who is the owner of the gold in a gold IRA
The IRS considers gold owned by an individual to be “a type of money” and is subject taxation.
To be eligible for the tax-free status, you must possess at least $10,000 gold and have had it stored for at least five consecutive years.
Owning gold can also help protect against inflation and price volatility, but it doesn't make sense to hold gold if you're not going to use it.
If you plan on selling the gold someday, you'll need to report its value, which could affect how much capital gains taxes you owe when you cash in your investments.
To find out what options you have, consult an accountant or financial planner.
What is the tax on gold in Roth IRAs?
A tax assessment for an investment account will be based on the current market value, and not what you paid initially. If you invest $1,000 into a mutual fund, stock, or other investment account, then any gains are subjected tax.
But if you put the money into a traditional IRA or 401(k), there's no tax when you withdraw the money. Only earnings from capital gains and dividends are subject to tax. These taxes do not apply to investments that have been held for more than one year.
These rules vary from one state to another. For example, in Maryland, you must take withdrawals within 60 days after reaching age 59 1/2 . You can delay until April 1st in Massachusetts. New York offers a waiting period of up to 70 1/2 years. To avoid any penalties, plan your retirement savings and take your distributions as early as possible.
What is a gold IRA account?
You can purchase physical bullion gold coins at any point in time. You don't have to wait until retirement to start investing in gold.
An IRA allows you to keep your gold forever. You won't have to pay taxes on your gold investments when you die.
Your gold will be passed on to your heirs, without you having to pay capital gains taxes. Because your gold doesn't belong to the estate, it's not necessary to include it on your final estate plan.
To open a gold IRA, you will first need to create an individual retirement account (IRA). After you do this, you will be granted an IRA custodian. This company acts as a middleman between you and the IRS.
Your gold IRA Custodian will manage the paperwork and submit all necessary forms to IRS. This includes filing annual returns.
Once your gold IRA is established, you can purchase gold bullion coins. The minimum deposit required to purchase gold bullion coins is $1,000 However, you'll receive a higher interest rate if you put in more.
Taxes will apply to gold that you take out of an IRA. You will be liable for income taxes and penalties if you take the entire amount.
If you only take out a very small percentage of your income, you may not need to pay tax. There are exceptions. For example, taking out 30% or more of your total IRA assets, you'll owe federal income taxes plus a 20 percent penalty.
Avoid taking out more that 50% of your total IRA assets each year. You'll be facing severe financial consequences if you do.
- 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)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- 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)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- Gold IRA – Add Sparkle to Your Retirement Nest Egg
- Understanding China's Evergrande Crisis – Forbes Advisor
The best way to buy gold (or silver) online
You must first understand the workings of gold before you can purchase it. Precious metals like gold are similar to platinum. Because of its resistance to corrosion and durability, it is very rare. It is very difficult to use and most people prefer to purchase jewelry made of it over actual bars of Gold.
Two types of gold coins are available today: the legal tender type and the bullion type. Legal tender coins are those that are intended for circulation in a country. They typically have denominations of $1, $5 or $10.
Bullion coins can only be used as investment currency. They increase in value due to inflation.
They aren't circulated in any currency exchange systems. For example, if a person buys $100 worth of gold, he/she gets 100 grams of gold with a value of $100. Each dollar spent earns the buyer 1 gram gold.
When you are looking to purchase gold, the next thing to know is where to get it. There are many options for buying gold directly from dealers. First, your local currency shop is a good place to start. You might also consider going through a reputable online seller like eBay. You might also consider buying gold from an online private seller.
Private sellers are individuals who offer to sell gold at retail or wholesale prices. When selling gold through private sellers, you pay a commission fee of 10% to 15% per transaction. That means you would get back less money from a private seller than from a coin shop or eBay. This is a great option for gold investing because you have more control over the item’s price.
You can also invest in gold physical. It is easier to store physical gold than paper certificates. But, you still have to take care of it. To ensure that your physical gold remains safe, you need to secure it in an impenetrable container such as a vault or safety deposit box.
If you are looking to purchase gold on your own, you have two options: a bank or an pawnshop. A bank can provide you with a loan to cover the amount you wish to invest in gold. Customers can borrow money from pawnshops to purchase items. Banks tend to charge higher interest rates, while pawnshops are typically lower.
The final option is to ask someone to buy your gold! Selling gold can also be done easily. Set up a simple account with GoldMoney.com and you will start receiving payments instantly.
By: Kevin Helms
Title: Global Recession Risk Amid Potential Iran-Israel Conflict: An Economic Analysis
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