/ world today news/ The British newspaper “Telegraph” sharply criticized the statements of analysts from the International Monetary Fund, made during the annual summit of the IMF and the World Bank in the Moroccan city of Marrakesh.
“The world is fast approaching another financial crisis, and the IMF is denying everything,” writes “Telegraph”.
“With rising energy prices and rising debt, the expectation of a global and protracted crisis grows stronger every day. In the context of the escalating war in the Middle East, another spike in energy prices and governments mired in debt, the feeling that a multi-year global crisis is looming is growing stronger every day,” the publication wrote, noting that at the same time there is an astonishing an atmosphere of calm bordering on downright indifference.
“We assess that a soft landing for the global economy is increasingly likely,” said IMF Chief Economist Pierre-Olivier Gurincha.
Commenting on the recent crash in the bond market, which has sharply increased the cost of government borrowing, Tobias Adrian, head of the IMF’s financial stability department, said there was nothing unusual about it. Negligence reeked from the speech of the US Treasury Secretary Janet Yellen. “I didn’t see any signs of dysfunction with interest rates going up,” she said in an interview.
But those who have suffered huge losses as a result of the market crash of the past few weeks are unlikely to share her opinion.
“It seems that all the ‘big players’ of global economic politics have come together and collectively decided to appear as calm as possible for fear of making the panic worse. This is what politicians do when they are backed into a corner – they deny reality in the hope that the situation will be corrected before someone musters up the courage to shout that “the king is naked”, mocked the Telegraph.
However, the publication continues, “there are virtually no precedents in history when such a rapid and large-scale tightening of financial policy would lead to a ‘soft landing.’ Moreover, the global debt burden has never been higher. We are literally drowning in debt.”
After consultations with colleagues from the World Bank during the meeting in Marrakesh, IMF analysts took a more sober look at the situation in global finance.
“The global economy is limping, not running,” said the IMF’s new global economic outlook report, Navigating Global Divergence, released after the summit.
The IMF pays particular attention to the growing geo-economic fragmentation, the intensification of which will mean high costs for “global prosperity”.
While there is still debate in the global expert community about the pace of the approaching global financial crisis, the fragmentation of global markets and economies is no longer up for debate. The economic journalist of the Rothschild magazine The Economist, Callum Williams, considers geo-economic fragmentation to be a key trend in the modern world economy.
“A new model is really emerging now… We call it the ‘home economy’ or the ‘national economy.’ Its main idea is to reduce the risks to a country’s economy – those arising from the vagaries of markets, unpredictable shocks such as a pandemic or the actions of a geopolitical adversary,” Williams wrote.
He sees the reasons for the creation of internal economies by governments around the world in the distrust of the “global economic village” model, which has become compromised. The financial crisis of 2008 and the pandemic-induced global recession of 2020 and the escalating trade war between the United States and China put an end to the idea that economic integration would lead to political integration.
Another crisis factor was the “energy shock”: “Vladimir Putin’s ability to use hydrocarbons as a weapon has convinced many politicians that it is necessary to provide an alternative not only to energy, but also to ‘strategic’ commodities in general,” notes Callum Williams.
It is clear that the analyst of the Rothschild publication is silent that the infamous “pandemic”, the energy crisis, as well as the conflict in Ukraine were provoked by the collective West. But this was well understood in many countries around the world, which took a course towards economic self-sufficiency, which the IMF politically correctly called geo-economic fragmentation.
As part of growing geo-economic fragmentation and an inward-looking economy, “some are raising tariffs, following the protectionist policies of the 1930s and President Donald Trump in 2018. Others are spending on research and development, hoping to recreate government-funded research labs of the 1950s that helped win the Cold War.”
Building on the European experience of the 1950s and 1960s, many governments hope to create national leaders in strategic industries – not in coal and steel as before, but in computer chips, electric vehicles and artificial intelligence. They provide huge subsidies and set domestic production volume requirements to encourage local production.
In response to two protectionist laws passed by the Biden administration – the Chips and Science Act, designed to boost the domestic semiconductor industry, and the Inflation Relief Act, which is less about inflation and more about subsidizing green energy, leading Western countries reacted sharply symmetrically.
The EU launched its Green Deal industrial plan with its own version of the chip law. 14 EU member states have created a scheme to support the development of microelectronics and communication technologies. France launches critical minerals production fund. India has developed a massive manufacturing incentive scheme for many industries, including solar PV modules and advanced batteries. As part of the K-Chip Law, South Korea provides tax incentives to semiconductor manufacturing companies.
Thus, the most developed countries of the West are switching to an active industrial policy, no longer relying on world trade, notes “Economist”.
The world’s largest corporations are reacting to the approaching crisis. “During earnings calls, company executives are increasingly talking about shifting production to their own countries,” Bloomberg reports.
Western multinationals, which for years avoided geopolitical issues while seeking profits in less developed markets, are increasingly building the factories of the future in like-minded countries, the agency said.
While the World Trade Organization recently said it was too early to call the end of globalization, it warned that geopolitical tensions were beginning to affect trade flows.
The fragmented geopolitical landscape, which Larry Fink, chairman of the board of directors of the world’s largest investment fund, BlackRock, has declared as a new “structural” force shaping corporate strategy is becoming increasingly visible.
The largest part of the geoeconomy, which is distancing itself from economic cooperation with the US and the EU, are the countries of Asia, writes “Economist”, noting that the future of the continent will be associated with less Western influence.
Since 1990, intra-Asian trade has expanded to nearly 60%. The expansion of regional trade led to an increase in capital flows, which further united Asian countries. “A new era of Asian trade has dawned that will change the economic and political future of the continent.”
Asian investors now hold 59% of the volume of foreign direct investment in the region, up from 48% in 2010. In India, Indonesia, Malaysia, South Korea and Japan, the share of direct investment from Asia is 61%.
“The new era of Asian trade will be more focused on local markets and less on the West. The same will happen to the continent itself,” say the analysts from “Economist”.
Translation: V. Sergeev
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