A disappointing forecast for the nearest development of the world economy.
The state of affairs in the financial sector around the world hints at the onset of a deep recession and the emergence of a serious recession. According to Bloomberg, the world economy repeats the scenario of 2007, which prepared the global crisis.
The global economy repeats the scenario of 2007 due to falling demand
One of the main indicators of the normal functioning of the market is stable demand. It is desirable that it generally grow gradually. But in September of this year, some companies announced a reverse trend. For example, Nike reports that warehouses of unsold products are only replenished. One of the main players in the logistics market, FedEx, warns of a sharp drop in the volume of deliveries of commercial goods. And Apple abandons the plan to increase the number of smartphones produced.
The global economy repeats the scenario of 2007 due to a strong dollar
In the last weeks of September, the US national currency strengthened in the stock market. But for most countries, this is not something positive. A high dollar exchange rate will help stop inflation in the United States – this is the plus of this fact for the American sector. But for other national economies, such a trend will not lead to the best consequences. The bottom line is that a strong dollar weakens other national currencies. For example, in Japan there was a significant depreciation of the yen. Subsequently, inflation rises, and states burn their reserves in the stock market in order to save the currency.
The world economy repeats the scenario of 2007: the inevitability of misses
The main problem of the current economic situation is that financial systems have no room for error. They drove themselves into this position due to a chain of circumstances. At first, the coronavirus pandemic forced states to resort to active external borrowing – this increased the public debt. And they would have come out of this after the restrictions were lifted, if not for Russia’s invasion of Ukraine.
Which spurred inflation on important categories of goods. And not only energy carriers, but also agricultural products. Also, the dry summer in various parts of the world caused additional damage to the agricultural industry. As a result of all these actions, a significant drop in living standards began. And the market lost its previous volumes of trade.
Bloomberg analyst’s opinion
Moreover, Bloomberg financial analyst Tom Orlik predicts aggravation of problems. After all, he believes that the recent example of the UK government indicates the inevitability of mistakes. The price of which, in terms of market impact, is too high. Orlik finds the relationship between the instability of 2022 and the problems of 2007 in one fact: the collapse of a certain sector led to fluctuations in the banking sector. Then the chain of consequences triggered a collapse in the US mortgage market. Now the trigger is the energy sector. And subsequent actions may become identical: banks will sharply raise rates in order to maintain their liquidity. At the same time, stock players will panic, creating uncontrolled price fluctuations in the market. As a result, inflation will only continue its rapid growth, and government bonds will sharply lose their value.