Global economy November 2021-

Written by  //  January 14, 2022  //  Global economy  //  No comments

Regime Change in the Global Economy
Michael Spence
After helping to drive decades of development and modernization in emerging economies, the twentieth-century economist W. Arthur Lewis’s Nobel Prize-winning growth model can now be applied to the entire world. Unfortunately, what it shows is that we are heading into a period of deep uncertainty and supply-constrained growth.
(Project Syndicate) Applied to the transitions now underway in the global economy, Lewis’s insights imply major changes in growth patterns, the structure of economies, the configuration of global supply chains, and the relative prices of pretty much everything – from goods, services, and labor to commodities and various asset classes. Equally important, they indicate that this transition will be irreversible. Navigating the global version of the Lewis turning point will be tricky. Understanding the underlying structural changes is the necessary place to start.

11 January
Global Growth to Slow through 2023, Adding to Risk of ‘Hard Landing’ in Developing Economies
(World Bank) Following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from COVID-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies, according to the World Bank’s latest Global Economic Prospects report.
World Bank warns global economy faces grim outlook
(BBC) The global economy faces a “grim outlook”, World Bank president David Malpass has warned, as the aftershocks of the pandemic continue to weigh on growth – especially in poor countries.
His organisation’s latest forecast predicts global growth will slow to 4.1% this year from 5.5% in 2021.
It attributed the slowdown to virus threats, government aid unwinding and an initial rebound in demand fading.
But Mr Malpass said his greatest worry was widening global inequality.
“The big drag is the inequality that’s built into the system,” he told the BBC, noting that poorer countries were especially vulnerable to economic damage from efforts to fight inflation.

2021

28 December
Happy new year? Five economic flashpoints to beware in 2022
From a new Covid variant to rampant inflation, the global economy faces some daunting risks in the new year
After the turmoil of the past two years, the consensus among economic pundits is that 2022 will be calmer. But in late 2019, when the first reports of a new coronavirus started to filter out from Wuhan in China, few imagined within months that the world economy would be flattened by a pandemic. So what are the big risks for the coming year?
– A new Covid variant derails the global economy
– Inflation takes off
– China hits the buffers and turns nasty
– A crisis in emerging markets
– A financial crash

22 December
Why bitcoin is worse than a Madoff-style Ponzi scheme
A Ponzi scheme is a zero-sum enterprise. But bitcoin is a negative-sum phenomenon that you can’t even pursue a claim against, argues Robert McCauley.
(Financial Times) By contrast to investments with Madoff, Bitcoin is bought not as an income-earning asset but rather as a zero-coupon perpetual. In other words, it promises nothing as a running yield and never matures with a required terminal payment. It follows that it cannot suffer a run. The only way a holder of bitcoin can cash out is by a sale to someone else.

2 December
Daron Acemoglu: The Supply-Chain Mess
Recent bottlenecks and price surges have underscored the risks that come with sprawling global supply chains supposedly built around the principle of economic efficiency. But beyond these glaring issues, supply chains impose additional social costs that warrant policymakers’ attention
(Project Syndicate) Global supply chains used to be the last thing policymakers worried about. The topic was largely the concern of academics, who studied the possible efficiency gains and potential risks associated with this aspect of globalization. Although Japan’s Fukushima nuclear disaster in 2011 had demonstrated how supply-chain disruptions could impact the global economy, few anticipated how central the problem could become.

3 November
Michael Spence: Why Are Supply Chains Blocked?
participants in global supply chains increasingly predict that the shortages, backlogs, and imbalances between supply and demand will persist well into 2022, and perhaps longer.
(Project Syndicate) When forecasts are not specific enough to be actionable, the supply response cannot adjust in a timely or efficient manner. And because there is relatively little slack built into global supply chains, large deviations from normal patterns produce delayed responses, shortages, backlogs, and bottlenecks, like those today.
in the first quarter of this year, growth was overwhelmingly projected to accelerate, and experts were not exactly sounding the alarm that supply would fail to keep up. Yes, influential macroeconomists did warn that the combination of highly accommodative monetary policy, elevated household-savings balances, pent-up demand, and massive fiscal spending significantly increased the risk of inflation. And, yes, those forecasts – which appear increasingly prescient – implied that a surge in aggregate demand, fueled by a wall of liquidity and frothy asset prices, could outpace supply. But the likely duration of the imbalance remained unknown, and many argued that inflation – and, by extension, supply disruptions – would be “transitory.”

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