Policymakers and investors have increased their awareness of systemic risks and crisis events. Policymakers have developed macro prudential policies to limit the impact of systemic risks. Investors have spent focused time and effort on tail risks and how to mitigate large losses from a market crisis. However, most of the focus has been on a single crisis or shock. Less time has been spent on thinking through the impact of multiple events that can all cause harms. If crises occur at the same time, a small crisis may turn into a catastrophic event. These correlated events would be a polycrisis. See "What Is a Global Polycrisis? And how is it different from a systemic risk?"
From the Cascade Institute - "A global polycrisis occurs when crises in multiple global systems become causally entangled in ways that significantly degrade humanity’s prospects. These interacting crises produce harms greater than the sum of those the crises would produce in isolation, were their host systems not so deeply interconnected."
So, what is the possible polycrisis we are currently facing? Let's just list some of the intersecting issues: Ukraine-Russia War, the pandemic residuals, the China-Taiwan-US situation, the deglobalization issue, the climate crisis, the inflation crisis, the excess money and debt crises, a commodity crisis, and an overvalued stock and bond market.
We will do walk through all these issues other than to say that the solution of one may conflict with another. Current energy security conflicts with climate change. The geopolitical issues conflict with inflation. The inflation problem conflicts with an overvalued market problem. All these crises are interconnected and complex. Policymakers will not be able to solve all. Solving one may make others worse. Each may change in importance over time, so it is difficult to forecast market behavior. A polycrisis adds to complexity and uncertainty. We live in a VUCA (Volatility, Uncertainty, Complexity and Ambiguity) world.
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