Many describe 2011 as a period of “heightened uncertainty” for the global economy because there are so many things than can go seriously wrong.

On the financial markets and government policy side, the world just emerged from the worst post-WWII economic crisis and conditions are still extremely fragile – some even think the recovery is fake and a new crisis is just waiting to unfold.

Moreover, extraordinary and unprecedented policies were implemented to combat the 2008 financial crisis. Now, many are worried about the potentially damaging impact of these extreme policies.

On the geopolitical side, the world is the most unstable it’s been in years in key regions.

Below are 10 looming risks that can derail the global economy in this period of “heightened uncertainty.”

Middle East / North Africa Unrest

The danger here is if a major oil producer like the United Arab Emirates and Saudi Arabia is hit with a Libyan-type of revolt and production is disrupted. If that happens, oil could easily shoot up to over $200 per barrel and cripple the oil-guzzling economies of China and the United States.

Food Cost

Food cost has soared because of natural disasters and speculators desperately seeking yield in an environment of historically low interest rates.

The risk is that high food costs will cause instability in emerging market countries and lead to protectionist trade policies all over the world.

US Debt Ceiling / Budget Crisis

Republicans and Democrats are playing a game of chicken with the debt ceiling. They also can’t seem to come up with a credible medium-term plan to reduce the budget deficit.

The fear is that Congress’ ineptitude and recklessness will trigger a Treasuries crisis that destabilizes the entire global financial system.

European Debt Crisis

The insolvency of peripheral European countries, the fear of massive haircuts on their sovereign debt, and the possibility of the euro currency not surviving in its current form are all possible triggers that could crash the European banking system.

US Housing Market

The double-dipping US housing market is a slow motion train wreck that keeps on getting worse and worse. The danger is the banks’ exposure to mortgage-related investments and further damages to US household balance sheets.

End of QE2

Bill Gross of PIMCO, the world’s largest bond fund manager, went short Treasuries because of QE2’s looming termination date on June 30, 2011.

Many other financial professionals agree with Gross and believe QE2 has massively inflated the prices of financial securities and that its termination could lead to a substantial sell-off in the financial markets.

Chinese Inflation

China’s remarkable recovery after the financial crisis was fueled by a massive lending spree. Now, inflation is running rampant and China has drastically tightened monetary policy in response.

The fear is that if Chinese authorities take away the fuel that powered the growth in the first place, the economy will naturally run out of steam and possibly crash.

Chinese Economic Distortions

Noted China bears like Jim Chanos believe China’s economy is heavily distorted and based on economically unviable properties construction. Others believe the manufacturing sector is also heavily distorted. The results of these distortions are idle factories and empty buildings.

If the China bears are right, China’s economy is unsustainable and a crash waiting to happen.

Terrorism Provoking Costly US Response

Al-Qaeda and the Taliban have already threatened revenge attacks against the US for Osama bin Laden’s death.

The fear is that a terrorist attack on the US would provoke the US government to step up its military engagement in the Middle East and enact even more pervasive security measures at home. Both actions would be costly and damaging to the US economy.

US State Budget Crisis

Quite a few US states are insolvent or nearly insolvent, depending on how one defines insolvency. Moreover, the outlook for their economies and tax revenues look bleak.

These states could conceivably default on their debt and trigger a widespread US economic crisis.