A new kind of global recession: Why this time is different | Business Beyond

The world is in the midst of an economic

recession

, certainly a

global

recession

is a major risk, three of our biggest economic engines are failing from the war in Europe to the China blockade and rising inflation, a bitter mix is ​​hitting the economic powers of the world and there is no No, no, there is no

kind

of light point at the end of the tunnel because now everything begins to feed on each other. In

this

video we will ask what makes

this

economic crisis so

different

from the Great Recession of 2008. This is a recession. that is

different

perhaps from the recession of the financial crisis that was supposed to end the crisis that is being felt, but each individual definitely in the coming years we are going to witness a world from a Chinese perspective that we are not used to, we will discover the paradoxes. that make this recession unique, so the job market actually looks pretty good, which is one of the confusing things about today's economy.

We will assess how easily this crisis can be remedied compared to the previous one. We have no tools right now to address the crisis. recession that we are facing and we will see the countries that are resisting the negative trend that is coming in

business

. Further, both the IMF and the World Bank warn that we are approaching a

global

recession, but determining what counts as a recession and what does not can be complicated. There is no official definition, a common rule of thumb is that when an economy experiences two consecutive quarters of negative growth is in recession, but a decline in GDP is not the only indicator, other metrics such as unemployment levels and consumption confidence also plays a role people lose their jobs have to cut back on their savings unemployment can be extremely disruptive personally not only for economic reasons but also for a sense of well-being for a recession to occur many factors are at play, which is why declaring a recession is often in the hands of national organizations that analyze economic cycles such as national recessions.

The global ones also do not have a clear definition; They occur when a large number of major economies are going through an economic crisis in our globalized economy. A recession in one place means problems for other knock-on effects to reverberate around the world and that is what worries analysts at the moment. Certainly a global recession is a major risk, but our current forecast has what we would call a growth recession, we don't have a global contraction. economy but we have poor growth with rising unemployment GDP growth in the global economy is slowing the international monetary fund predicts that a third of the world economy will likely be in a technical recession next year the US and the eurozone face an especially bleak outlook in the US economic growth is slowing to a fifth of its 2021 levels next year in the eurozone growth is almost completely stalling for many of us the phrase global recession still conjures up images of publicly shamed bankers and people losing their homes to understand the current economic downturn It is better worth revisiting what happened in 2008 during the financial crisis that pushed the global banking system to the brink of collapse and left the bored unable to pay their homes and it all started with a housing bubble in the US, an entire industry exploded around giving to people.

Mortgages Mortgage brokers eventually got greedy, they started making loans to people who didn't make enough money to pay them back. Those mortgages were combined into large packages and sold to banks. In the end, the inevitable happened: the borrowers could not pay their loans and the House. of Cards collapsed causing a banking crisis the first recession was a recession that was essentially based on the fear of the banks and the distrust of the people who were in the banks because they were no longer sure which of the banks was solvent and which was not. so they stopped landing all together.

Banks had to be rescued from ruin by government bailouts and the crisis spread beyond the United States. European banks had bought many bad mortgages from the US, so they also collapsed and had to be bailed out by governments of many European countries. Countries eventually could no longer pay their own debt. Government budgets were reduced, resulting in years of austerity and having a dramatic impact on the lives of millions of Europeans. So how is the current economic downturn different this

time

? Money is not the problem. There is no shortage of capital. In fact, the banks and the capital markets limit have piles of money that they cannot spend at the moment because there is nothing coming into the EU economy, so this

time

the world is not short of cash, but It's almost everything else when the pandemic hit the fragility of supply chains became evident, factories from Asia to Europe and North America halted production, sending the global economy into free fall as countries exited.

From the lockdowns, demand for goods and services returned faster than current supply. The increase in orders has exceeded availability. Companies throughout the economy have had difficulty hiring workers. Food and energy prices are rising, adding to the fact that the world's manufacturing powerhouse has closed its stores in China. Lockdowns continue to wreak havoc Chienping's zero greed policy aims to isolate each individual case of greed 19. Strict implementation means regular lockdowns make

business

and manufacturing extremely difficult when they get waves you know entire cities are on lockdown and that affects the supply chain around the world. Now the shortage of one thing has become a shortage of another, a shortage of semiconductors. has halted car manufacturing and, unlike the US-led financial crisis, it is Europe that now feels unique pressure with the world.

Supply chains and problems are ready. An additional factor that created the perfect storm on the continent: the war in Ukraine that woke us up to Europe has realized that one of the most important inputs for its production, that is, energy, depends on a very, very unreliable for decades. Russia was Europe's top gas supplier, supplying nearly half of the bloc's gas supply, but that has changed dramatically this year as Europe has rushed to find alternative energy sources. Europe needs to reduce energy demand by 10 percent, which already means we will enter an economy that produces much less, but it is not just energy that has become a victim of war.

Ukraine is one of the largest countries. agricultural exporters of the world since the Russian invasion food prices are rising for the European and global economy supply shortages and a drastic increase in food and energy costs create a toxic cocktail if demands remain the same and the supply of a good falls in price It rises if you have that in the entire economy as a whole in the labor market in many goods markets in the energy markets and in the food markets then you have widespread inflation for the first time The world is facing an inflation crisis in the US.

The UK and the Eurozone are especially feeling the rise in prices in the EU. Inflation is the highest ever recorded in the US. It is at its highest level in 40 years. Inflation is a major challenge for all of us around the world. Too much money is chased. too few goods, that means the items we need for our daily lives are becoming more expensive. It's also what makes this economic downturn so different from the last one. This is a recession that may not resemble the financial crisis recession that was meant to end the crisis. uh, that is felt but each individual simply because we all have to use energy at home and we all understand that when inflation is high with the power of pregnancy of our salaries or our income and our wealth the cost of The crisis that The world is experiencing is causing a shift in global economic policy, causing central bankers to say they have had enough of rapid price increases.

We made today's decision and expect to raise interest rates further because inflation remains too high and is likely to stay above it. our goal for an extended period, we have the tools we need and the determination it will take to restore price stability on behalf of American families and businesses. Price stability is the responsibility of the Federal Reserve and serves as the foundation of our economy and the United States reduced a push to encourage banks to start lending and help economies weather the storm. This time they are flipping the script because for every central bank that is currently cutting interest rates there are now 25 that are raising them according to Deutsche Bank, a proportion that has not been seen in decades by making it more expensive to buy a car, get a mortgage or use a credit card.

They hope to reduce people's spending and slow inflation, but the tools that will fix rising prices will also stagnate economic growth, which means we have two. we have problems and we have low growth and high prices and therefore the policy that is done to address this crisis has to be quite different and also the policy mix is ​​a little bit more uncomfortable, if you will, in terms of solving the problems. two problems facing central banks. facing a difficult balancing act raising interest rates could further sink a rudderless economy doing nothing means letting inflation run wild In a recession worse than what would be required, it is very difficult to get monetary policy right because there are significant delays in the system, so we often can't say what is perfect for the current policy for six months and it feels like something else. different about this economic recession, especially in the world's largest economy, the United States, for many people the word recession means worrying about losing your job, because the two usually go hand in hand in the US GDP. fell in 2008 and unemployment rose in July.

The country's unemployment rate was the lowest in half a century and has remained exceptionally low since then, despite the economic downturn, so the job market actually looks pretty good, which is one of the confusing things about the current economy. There are some indicators that seem very positive. And consistently, there are some indicators that are much more concerning, but the labor market indicator in the US in particular is very strong, unemployment is quite low, labor force participation is good, job offers Jobs are high relative to the number of people seeking employment, so This is a time of enormous opportunity and strength in the labor market for many American workers.

This is a unique time in the US. Companies cannot afford to lose employees because many of them are having trouble finding workers in the first place, but the US faces a paradox, despite a strong job market, people are worried, especially those looking to start their careers, the current class of 2023 is certainly worried about the current economic situation, so around 50 percent of our respondents in one of our most recent surveys They shared that they absolutely have some worries and anxiety, things are looking good and bleak at the same time and that is making Americans feel uncomfortable. Consumer sentiment is a measure that shows how people feel about the economy and whether they will spend or save their money right now.

People just feel a little more. optimistic than during the 2008 recession and what that means for the future of the US economy. Employment numbers look much more optimistic than during the last economic recession, but the way people feel is a central driver of economic growth and a pessimistic outlook can become a self-fulfilling prophecy a very different economy but one that is also going through a turbulent period is the second largest China in the world. Decades of accelerated growth have seen China dramatically catch up to the US economy in terms of size, but policymakers in Beijing are now struggling with a multifaceted economic crisis, the pandemic and the housing bubble have combined to hit something China had reached. to take economic growth for granted.

China's annual GDP growth has steadily declined over the past decade, inevitable given what Hyde has been like. Before the pandemic, the country was still recording growth ofaround seven percent, but following a recovery in 2021, the IMF now expects the Chinese economy to grow just three percent in 2022, what we have been witnessing for the past nine months is roughly a continued slowdown. of the growth dynamics in China during the 2008 financial crisis China introduced a huge fiscal stimulus package, many analysts considered it as the reason why China weathered and recovered from that storm much faster than other major economies if you look at in the 2008-2009 recession, the Chinese fiscal crisis.

The response was quite strong, like they did a good job of keeping the Chinese economy going despite that recession and that was helpful for the world economy as a whole. If Chinese growth helped the global economy emerge from the last crisis, it is unlikely to do so this time. China's covert zero policy and the draconian rules that accompany it are a big reason that largely sends a message to Chinese consumers and investors that now in China politics trumps especially when politics is presented as an obstacle to the economic growth that the Chinese Communist Party would do. make the right decision and let the economy prevail what zero greed has notified is that that perception, if not incorrect, is at least no longer viable. um in in XI Jinping zero greed in China has weakened Chinese economic sentiment and undermined domestic consumption.

Chinese consumer spending is higher. Down more than 10 percent from before the pandemic, another major factor driving China's woes is its housing market. China's real estate sector has been in crisis since 2020. New government debt regulations aimed at cooling and overheating the real estate market left companies like evergrant out of money. Skyrocketing real estate cash debt has been described as a systemic risk to the entire economy and since the crisis began, China's real estate market has seen a serious decline between Covid zero and the housing crisis. China has enough problems of its own to deal with and that is having a knock-on effect around the world.

If China doesn't buy, that means Europe doesn't sell, so I think. There is an element of bad news, if you will, also from the slowdown of the Chinese economy. So what does all this mean for China and the global economy as a whole? Well, the Chinese economy continues to grow, not contract, but The slowdown has already begun and may be part of a longer-term change. There was an almost unshakable sense that the Chinese leaders or the Chinese Communist Party, as they put it, would guarantee that their children or the next decade will be richer than the previous decade. that just happened and that, in fact, was based on almost five decades of astonishing economic success, today it seems that Chinese households understand that the growth engine they have experienced over the last decade has run out of fuel and that the Chinese leadership in Beijing aims to redirect the economy towards a new form of balance, it seems that the engine that helped lift the world out of the last global recession will not be up to the task this time, it is clear that the world's largest economies are facing a storm but one area of ​​the world has been bucking the trend during the 2008 crisis China was still outperforming its Asian neighbors now for the first time since 1990 other Asian countries are set to overtake China economically growth continues to outpace inflation here Never I would have thought that true, I think it's just the difference in the cycles because, in Asia, ASEAN and India, you know they were really hit by our first wave in 2020 and then by the Delta Delta wave in 2021, but fortunately not as much by Omicron and you know they're coming out of their lockdowns for most of this year as China went into lockdown this year due to the zero coverage approach so you know it's still very focused on Kobe that that difference and in terms of their demand, emerging economies are benefiting.

As China's zero concealment policy worries investors, if China locks down, where is its alternative production base in Asia? Do you know if you are moving to Indonesia in Asia Pacific? Indonesia has been prospering, especially Against all odds, economic growth has exceeded forecasts here and inflation is still slightly below six percent the cost of living crisis is descending on Europe and the US but in Indonesia the government fuel subsidies have softened the blow the Indonesian government is setting its own prices for gas the so called administered prices which Indonesia definitely benefits from There is a lot of political support so the reason inflation is so low is because there are administered prices and that has kept it low.

The central bank has not been under as much pressure. The subsidies have amounted to a considerable bill. Rising commodity prices around the world have actually helped this economy. Indonesian coal exporters are generating record profits. The country expects a promising 2023, so at 4.7 I would still say growth. The outlook looks quite resilient next year, especially as we talk about our major economies entering recession. At the beginning of this video, we looked at the 2008 recession and asked how this economic downturn will be different from what the experts we spoke to said. What was described was a crisis that was not caused by the banks, but when it is partially triggered by war and politics, there are some things that are inevitable, such as defending democracy, as the Europeans, Ukraine and the United States are trying to do right now, I think. you know the cost of that is not zero, right, but some things are worth paying a cost for.

Of course, governments should do everything they can to protect their citizens from these costs, but I don't think they will tell citizens that the cost is zero. This is realistic or true and there are some things in life that are worth making a sacrifice for with bank bailouts and regulation. Policymakers have the tools to react to the financial crisis, but much of what is happening now is outside policymakers' control. The mechanisms to address the supply-side crisis are nothing more than invading China and forcing them to produce semiconductors. Invade Russia. Have Putin stop invading Ukraine and loosen up magnificently, etc., and that's obviously not going to happen.

We really don't have tools in the normal situation, we don't have tools right now that can address the recession that we face, while the central banks intervene to stimulate the economy in 2008, this time they are contributing to a slowdown. Price-gouging medicine is also poison for the economy, and unlike the 2008 financial crisis, this crisis is having a much more obvious impact on our daily routines. Everyone understands that we won't be able to turn on the heat next winter as much as we did in other years. years or we are going to see an exorbitant bill, everyone who has a car will have seen it in the run up to the energy crisis, how gasoline was so expensive to fill the tank. automobile, so this is a crisis that I think dissipates across all members of society and therefore is felt much more.

It's not just the economic impact that households feel, they feel it immediately in their household income, but there are also positive developments. that go against the financial crisis, we are at a time where there is a huge talent shortage and therefore, even if we enter a recession, there are still many jobs available, we are at a unique inflection point in the global economy compared to the last crisis, the one we face now is much more multifaceted: the war in Ukraine, an energy crisis, rising costs of living and widespread pessimism combine into an unpredictable economic mix and that's all of this episode beyond business, if you enjoyed it.

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