Reversing Recessions
Submission by Derrick Cui, Published February 7 2020
Submission by Derrick Cui, Published February 7 2020
The statistics are in; many executives in top multinationals, as well as many in the political world, believe a recession is coming in 2020. Yet many top stock traders like Buffett are still buying with fervour, pushing the stock market to ever-increasing highs. So, who is right?
Though some contend that a recession is just over the horizon, an increasing population believes it is not. Even if interest rates go further into the negatives in the EU and get surprisingly close to 0 in the US, new (or rarely used) monetary policy features such as an UBI (Universal Basic Income) check given to every adult in certain countries in South East Asia, or more bond-buying schemes in the US could lift the global economy out of stagnation. Other possible solutions could yield quantitative easing by injecting more money into the economy or providing even more generous stimulus packages to companies and industries in need.
In such an interconnected world, I am thoroughly doubtful that a recession is coming soon. Even if entire industries and countries do not play by the rules, central banks can still finance all projects, no matter how expensive, by debt financing. Even when a loan term is reached, it can be refinanced to, apparently, forever.
Since the US dollar is still the global benchmark for trade worldwide, the US is still the most powerful economy (and therefore political entity) in the world. A possible issue I see is the global currency shifting from the US to China. Currently, China is the largest global trader with the US only falling to second place in the past few years. However, at the same time, countries are
buying US debt at unprecedented levels. In fact, the Chinese government has accelerated its debt-buying of US treasury bonds, currently owning $1.10 trillion of US debt, more than any other nation.
Another problem is with people; people are unpredictable and too susceptible to the herd instinct. And yet, the basis of America’s dominating market is its high-spending consumers. So central banks have their work cut out for them; since people seem to focus their actions mainly based upon the stock market, as long as central bankers tick the right boxes in letting everyone
believe they’re getting a steal by borrowing and investing, numbers will continue to grow for the foreseeable future.
Though some contend that a recession is just over the horizon, an increasing population believes it is not. Even if interest rates go further into the negatives in the EU and get surprisingly close to 0 in the US, new (or rarely used) monetary policy features such as an UBI (Universal Basic Income) check given to every adult in certain countries in South East Asia, or more bond-buying schemes in the US could lift the global economy out of stagnation. Other possible solutions could yield quantitative easing by injecting more money into the economy or providing even more generous stimulus packages to companies and industries in need.
In such an interconnected world, I am thoroughly doubtful that a recession is coming soon. Even if entire industries and countries do not play by the rules, central banks can still finance all projects, no matter how expensive, by debt financing. Even when a loan term is reached, it can be refinanced to, apparently, forever.
Since the US dollar is still the global benchmark for trade worldwide, the US is still the most powerful economy (and therefore political entity) in the world. A possible issue I see is the global currency shifting from the US to China. Currently, China is the largest global trader with the US only falling to second place in the past few years. However, at the same time, countries are
buying US debt at unprecedented levels. In fact, the Chinese government has accelerated its debt-buying of US treasury bonds, currently owning $1.10 trillion of US debt, more than any other nation.
Another problem is with people; people are unpredictable and too susceptible to the herd instinct. And yet, the basis of America’s dominating market is its high-spending consumers. So central banks have their work cut out for them; since people seem to focus their actions mainly based upon the stock market, as long as central bankers tick the right boxes in letting everyone
believe they’re getting a steal by borrowing and investing, numbers will continue to grow for the foreseeable future.
