Nov 20,2019 -JORDAN TIMES – Shehab Al Makahleh
The record debt of key world economies including the G8 is fraught with calamitous hazards for the international community. Thus, if deleverage takes place soon, this will be a prelude to a cataclysm conducive to WWIII similar to what happened when the Great Depression had driven superpowers to launch war to export their internal recession and domestic issues to other countries so that the developed nations’ economies be incentivised. The United States, China, Japan, Germany, Great Britain, France, Italy and Spain will be incapable by then to resolve this issue.
Recent statistics reveal that world aggregate debts amounted to $247 trillion the first six months of 2019. This constitutes almost 320 per cent of the world’s Gross Domestic Product (GDP). The developed nations’ share of this amount is $177 trillion; the developing nations’ share is $69 trillion. Over the past 30 years, the world economy has experienced three economic crises, one every 10 years.
In 1987, millions of dollars disappeared from global stock markets in what was then known as the Black Monday. In 1997, the economic crisis hit East Asian markets and the economies in those countries shifted from a recovery to a complex recession with financial market losses reaching more than 50 per cent of their value. In 2008, the global financial crisis hit global markets due to the US mortgage bubble. In 2018, the world’s debt amounted to $223 trillion, with a $76 trillion and the world corporate debt has reached $70 trillion.
Since 2008, world investment in the so-called real economy has dwindled, world economy growth has slowed down and global recession is mounting, given the fact that the accumulated aggregate debt will be a main reason that destabilises the world financial system. In this regard, there has been much speculation in the press recently about the imminent global collapse and the inevitable consequences. The year 2020 is expected to begin with a major economic recession to ignite the US-China trade war. Expectations are that the next global financial crisis will hit the world, causing global economic chaos once again. Experts believe that the strike will be more violent and greater than that of 2007-2009.
It is easy to see with the naked eye that there is a crisis in the capitalist system, which is based on monopoly and the accumulation of wealth in the hands of a few, causing large income inequalities and imbalances. Less than 1 per cent of the global population controls the future of the rest of the world population. This applies to all countries, including Arab countries, which will not be immune from the economic earthquake because of the direct consequences of the recession, leading to the collapse of companies and businesses, factories, banks and financial markets.
What will happen in 2020, shortly after the US elections that President Donald Trump is expected to win, will strengthen the populist and nationalist currents in the world, increasing the phenomenon of extremist and right-wing parties in all countries, leading to the outbreak of an international war. Though economic activity in many countries is likely to continue in 2020, global political conditions will create an environment for recession as global stimulus packages near the end. The world will witness great volatility and trade disputes between more than one country such as the US-China conflict, creating a burden on economies as interest rates rise which are now on an upward trajectory.
The two major factors that would accelerate the world war are financial and economic factors. The first is the credit financing which is right now the driver for enhancing international consumer demand and growth of stock markets. The second factor is that world debt rates are increasing faster than the growth of world economies. For every one per cent of global economic growth, accumulative world debts increase by 2-2.5 per cent.
Recently, in a half yearly report, the International Monterey Fund disclosed that corporate debt-at-risk could rise to about $19.3 trillion. The fund warned that that it will be unmanageable to service more than 41 per cent of corporate debts the G8 world leading economies. Furthermore, the more populist the countries be, the more the discrepancies and a negative trade sheets the world will face, sinking the world into depression faster than ever.
In conclusion, the world will encounter credit market bubble; overproduction of goods and commodities in the US, China, Germany and Japan, Artificial Intelligence War between China and other countries, recession in the developed nations. Though the US ranks first economically and China second in the last ten years, both have not been able to balance debt to GDP. The US public debt increased by 107 per cent and Chinese public debt increased by 171 per cent. This would have a domino effect on other countries of the G8 before the impact is crystal clear in other economies.