Ok! Donald Trump said it first! The Global Economy is headed into a New Great Depression! At a rally in Arizona last night, Trump “predicted” that the US Economy is approaching levels of distress not seen since the 1930s when the Great Depression eviscerated the nation. While I do not intend to debate the merits and demerits of Trump’s “attack” on Biden’s economic policies, I offer my own Moron’s Guide to the looming depression on the horizon. Included in this article are the 3Ps that have been the chief cause of the present malaise or the combination of Populism, Pandemic, and Putin that have somehow converged to push the Global Economy into the abyss. Ironically, Donald Trump is the “hero of infamy” here as he had a “starring role” to play in all the 3Ps.
Let us take Populism or the emergence of authoritarian “strongmen” worldwide since 2016. Starting with Trump and Bolsanaro, including Xi and Modi, and not leaving out Putin, the populist tide has undone the globalization process responsible for the “roaring” 1990s and the “booming” 2000s. While those disaffected by globalism might have turned to these dictators, it is undeniable that globalization was the single biggest factor responsible for lifting billions out of poverty, especially in the developing world, and more specifically, in Asia, where both China and India as well as Bangladesh, Vietnam, and the Philippines, became the “New Asian Tigers” after the first wave of Southeast Asian nations such as South Korea, Indonesia, Thailand, and Malaysia rode the economic growth bandwagon.
Of course, populists can only do so much, despite their “sway over the masses”, and the global economy continued to grow, albeit at a slower clip. For instance, despite Demonetization and the botched rollout of GST (Goods and Services Tax) in India, the Indian Economy was not really “done in”. Likewise, the US, China, and other countries that mattered too continued to post more or less steady growth, though the rates became modest each year. What caused the “paralysis” in the Global Economy was the Pandemic, which perhaps was a “shock” to the system, not seen since the World Wars. Not only was the Pandemic a blow to livelihoods and led to the loss of lives, but it was also a Once in Century “Black Swan” (low probability, yet, high impact) event that “shook” the world to its core and “bled” us all to the point where even “emergency surgery” in the form of bailouts and stimulus packages could do little to “save” us from the inevitable morbidity in the ICU (Intensive Care Unit).
Given our species’ innate ability to adapt and adjust, we did start to recover from the Pandemic when Putin “struck” with his Ukrainian “adventure”. For the Global Economy that was still not out of the woods, this was like a “Double Whammy” of sorts, where the recuperating patient in the ICU relapsed to the point of no return. As nations worldwide scrambled to secure oil and gas as well as wheat and minerals, there was the added problem of “clogged” supply chains, with China’s Zero Covid lockdowns becoming the world’s “headache”. Moreover, the Putin “shock” occurred at a time when his “pal” Xi was administering “strong medicine” to his people, what with China’s economy in “slow motion implosion” due to the “troubled” real estate sector and a debt crisis going out of control. What is the clincher here was that all the Ps converged in a “perfect storm” of gigantic proportions where the headwinds turned into torrential gales, leading to a monster hurricane in the form of high inflation, low growth, and high unemployment, all adding up to a “weird” economic situation.
One must not overlook the most significant P of all or the Central Bank Printing Presses that kept the Global Economy on steroids all this while, covering up for everything and anything to the point where Interest Rates at Zero or worse were the only succour to the Global Economy in the ICU. Indeed, Printing Money was the “first and last hope” for the economic stewards, and this kept us all going. Now, with no choice in the face of runaway inflation, the “taper and tighten” policies of Central Banks worldwide have let “all hell break loose” at a time when demand destruction coupled with supply shocks mean that a New Great Depression is inevitable. The term for this is stagflation, and with high employment and wages, it becomes anybody’s guess as to where we are headed. Indeed, the 4Ps discussed so far have made us all “leap into the unknown”, and with the future becoming so unpredictable, there is every chance that this Age of the Unexpected can be worse than the Great Depression of the 1930s.
So, dear readers, buckle up for the “turbulence” ahead. If you, like me, are in India, then brace for a social crisis where economic angst meets sectarian rumblings, a time of massive unemployment. With more than 60% of the workforce not even looking for a job, the desperation and desolation, along with destitution and dispiritedness, make for a lethal cocktail that can overwhelm the nation. Moreover, India’s neighbourhood has already entered choppy seas with Srilanka’s anarchy, and Pakistan’s slow slide to bankruptcy makes us all worried about whether we are next. Perhaps, India is too resilient to such crises, though we had our own “tryst” with near insolvency in the 1990s. Indeed, these are testing times for everyone and the poor in particular, and when whole nations are vulnerable to defaults and dire straits, invoking Divine Intervention might be the only way out as our elites struggle to manage such mindboggling complexity.
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