The Great Unraveling: What “Held” The Global Economy Together For The Better Part Of Five Decades Is Coming Unstuck!!

Ever since the Free Market Neoliberal Consensus emerged in the aftermath of the American repudiation of the Gold Standard, the Global Economy has been held together by the “forces” of Globalization, Free Trade, Migration, Cross Border Flows of capital and services, a Bi-Polar superpower rivalry, and above all, low to zero interest rates worldwide ushering in a decades long expansion, lifting Billions out of poverty, and leading to an “era of prosperity” and high growth world over.

There are enough indications that this “goldilocks phase” is coming to an end. For sure, the Ukrainian war accelerated the “demise” of the Post Second World War “consensus”, solidified by the aforementioned ideology. However, some of the “undercurrents” undermining the global economy predated the Ukrainian war and chief among them is the rise of “populist” leaders of the ultra nationalistic kind, more often than not belonging to the far right of the political spectrum. Donald Trump among others has done more damage to globalization, with his MAGA rhetoric, and all out “attacks” on immigration.

Apart from this, the Covid pandemic “buried” whatever was remaining of the Neoliberal “illusion” along with Millions of victims of the deadly virus. Next came Putin completing the Third P of the 3Ps of Populism and Pandemic. The combined impact of all these “destabilizers” has been high inflation, low growth, and an estimated 90 Million people pushed into poverty just in Asia alone. As Central Banks worldwide raised interest rates to rein in inflation, the “brunt” of the cumulative hikes is being felt now with depressed demand, delinquencies,  debt crises, and massive reduction in purchasing power of consumers.

What we have now is a Global Economy in a “stagflationary” spiral where the Eurozone is testing recessionary conditions, and multiple Low Income countries on or already on the verge of default. If this weren’t bad enough, now we have the Big C, China, on a “deflationary” doom loop, spelling more trouble for the Global Economy. Remember, the Chinese “guzzle” Oil, gobble up commodities, import luxury goods, and are otherwise the “second engine” powering the global economy for the better part of three decades. Just imagine what would happen if all this “demand” dries up or turns to a trickle!

This, my dear friends is what the “problem” is! The party is coming to an end, and now the battles over who picks the tab, and who runs the show from now on, begin.