The world has glimpsed financial crisis. But is the worst to come? : The Guardian

As the Davos jamboree wound up on Saturday, Tidjane Thiam, chief executive of Credit Suisse, captured the mood. “The market is very worried about China,” he said, adding that dealers were sceptical about official figures showing its economy was growing at close to 7%. “The markets believe there may be a hard landing or a very significant reduction in growth which will have a big impact on the rest of the world. There is a fear that we are walking into a global recession.”
But with central banks’ interest rates at historic lows and billions of pounds in quantitative easing – printing money – expended, the institutions charged with breathing life into a flatlining global economy have few weapons to draw on. “I think that the arsenal of many central banks has been significantly depleted and we no longer have many of the options that existed in years past,” said Eric R Peterson, partner at consultancy giant A T Kearney. “My sense is that we have an incredibly complex and challenging combination of short-term and long-term-range challenges to face. When you put it all together, in my view you have a global economy on a hair-trigger. In the short term even the most minor shocks or perturbations can generate very significant effects.”
 Iran’s re-entry to the oil markets is having an impact. And it could not have come at a worse time. The International Energy Agency is warning that oil markets could “drown in oversupply” this year. The US fracking revolution has meant the world’s superpower is no longer heavily reliant on Middle Eastern oil. But, despite this, Saudi Arabia and other major oil producers are keeping the wells pumping. 
At Davos it was left to Christine Lagarde, managing director of the IMF, to promote an upbeat message. She pointed out that the fund predicts the world economy will grow 3.4% this year, up from 3.1% in 2015. But even Lagarde had to temper this message by admitting there were four significant downside risks to the prediction: China; the impact of falling commodity prices on producers; the fragile state of some emerging market economies such as Russia and Brazil; and the possible disruption that could be caused by the US Federal Reserve raising interest rates when other central banks, including the European Central Bank and the Bank of Japan, are still providing additional stimulus.