Global Economic Crisis

Sheldon Filger-blogger for GlobalEconomicCrisis.com

With a divisive presidential election occurring in the world’s largest economy in November, multiple signs point to long-term dangers for the global economy. They can best be summarized as debt, inflation, and global strife.

After a prolonged era of near zero or even negative interest rates in the economically developed world, most major economies now have histrionically high-interest rates, a policy measure meant to reduce high rates of inflation. While predictions are being made by economists that central banks will begin reducing interest rates as inflation is supposedly tamed, there are everywhere indicators of global tensions that can easily spike core inflation to elevated levels. The war between Russia and Ukraine has fractured oil, gas and food supply chains throughout the world. In the Middle East, the proxy war between Iran and Israel threatens to interdict oil supplies from the region, so vital to major economies.

Another factor is that much of Europe and North America enjoyed a peace dividend after the collapse of the Soviet Union. That is now over; having pared defense spending to a minimum, that policy is now being revered, further contributing to already high sovereign indebtedness. The resulting increased level of deficit spending, combining with higher interest rates, will result in much higher levels of public spending being devoted to debt servicing costs. That will impede social spending, resulting in an increased level of social strife.

All the above facts point to a substantial risk of sustained stagflation. In an era of unpredictability, one given is that the global economy will face unprecedented challenges in the coming decade, with the real risk of a worldwide economic depression. Amid all the negative indicators, it is difficult to see any light at the end of what appears to be a long and darkening tunnel.