The Emerging Crisis in the Global Economy
By: Chermo Toure
It seems like it was a century ago since the Great Recession took place, where a vast majority of people across the global were losing their jobs, houses, and livelihood. However, the Great Recession was only ten years ago.
But how would it sound if someone were to tell you that there might be another Great Recession around the corner? It would sound crazy.
However, some economists and political scientists, who politically identify across both spectrums, have concluded that there is an emerging global economic crisis about to happen. For example, leading economist Richard Wolff has said on numerous occasions that the world is heading for an economic collapse.
There is a plethora of sources could be responsible for causing the next global economic crisis, but the crisis that is manifesting in emerging market economies is something to be concerned about.
While the mainstream media in the U.S. directs most of their attention to Trump and the Muller investigation, what doesn’t get much coverage is the crisis going on in some emerging international market economies.
In Turkey, for example, their national currency is on the brink of collapse. According to the Financial Times, the crisis with their national currency began when the United States and various countries of the eurozone started to introduce their quantitative easing program.
Financial Times also explains that Turkey started losing it funds through the quantitative easing program, and the United States and eurozone countries are to blame. Consequentially, investors in the country panicked and started moving their investments elsewhere.
As the problem in Turkey is still ongoing, South Africa is experiencing its own economic recession as well. According to Reuters, the reason for this recession in South Africa is because the country’s economy had contracted both in the first quarter and second quarter of 2018.
Reuters also stated that South Africa will not be getting out of their recession very soon. This is because the inflation in South Africa is at 5.1 percent. Additionally, rating agencies have put South Africa’s sovereign ratings at near “junk” status.
Similar to the crisis happening in Turkey, Argentina is also having its own currency crisis. According to The Guardian, Argentina’s central bank increased its interest rate to 60 percent in order to try and curb the plunging of their currency. The government of Argentina is also practicing austerity to try to restore foreign investors’ confidence in the country. This attempt, however, was proven ineffective.
Judging by the number of similar issues worldwide, it is evident that the United States has played a major role in why these emerging market economies are heading toward a downward spiral.
With the Federal Reserve banks increasing their interest rates, this has caused emerging markets’ currencies and stock markets to tumble, according to The Guardian. This increase in U.S. interest rates also makes U.S. loans more expensive, thus making it harder for economies around the world to pay off their U.S. loans.
With the world economy being its most interdependent than it has ever been, U.S. tariffs on other countries has created a negative effect on the international economy.
According to Forbes, Turkey’s U.S. tariff on steel and aluminum has reduce their steel and aluminum trade by 56 percent. This caused an overall 5 percent reduction in Turkish steel and aluminum trading, thus giving Turkey less money and causing the markets to react in a negative way.
Still, Turkey’s economic crisis is nothing compare to China’s. China has been statistically shown to be one of the world’s fastest growing economies. It is expected that they will surpass the United States as the world’s leading economy.
However, with the United States’ recent tariffs on Chinese goods, it could cause an economic slowdown in China. According to Bloomberg, if the Chinese economy growth rate slows down because of these tariffs, it would be hard for China to make a swift recovery. With China as one of the two largest economies in the world, an economic slowdown in China could have a domino effect on the global economy.
As the United States continues to place tariffs on China, China also continues to retaliate by placing tariffs on U.S. goods. With the two largest economies in the world engaging in a trade war, this could have a detrimental effect on the global economy.