100 THE BiG DROP
called a “spillover effect” or “contagion.” Distress can rapidly
spread from the oil patch to commercial real estate and beyond.
Some of this debt-deflation spiral has already shown up in
the stock prices of affected companies. More stocks like them
may be heading for a fall as the Fisher debt-deflation cycle
runs its course.■ The System is Now Even More Unstable
Our job is to figure out how unstable the global financial
system is or how big is the unstable snowpack is. We knew
something about the risks derivatives, bank balance sheets,
sovereign debt and currency imbalances posed.
Now the oil price drop has revealed that the snowpack is
even bigger than we thought — $5.4 trillion of oil debt sud-
denly seems to be in jeopardy.
Will that be the snowflake that causes the financial avalanche?
At the risk of sounding like a broken record, I advise readers
to focus on instability.
How big is the snowpack?
How much damage is it going to cause when the avalanche
comes tumbling down?
Those are the relevant questions. Now we have both at
once — a bigger, more unstable mountainside and more snow
falling harder from the sky. That means we have more snow-
flakes to take account of.■ One Oil Snowflake to Watch
One snowflake that I’ve been looking at more closely is Algeria.
We’ve heard so much about the Islamic State in Libya and
Syria, Iran, Iraq, Afghanistan and Turkey. Those are all impor-
tant issues and none of them are going away. But keep an eye
on Algeria.