Financial Times Watch (18 January 2023)

Recession watch today begins with the words of the IMF. It was downbeat last year about the global economy, but at Davos this week they have started to see the silver linings. The FT reports on the front page that the IMF is most buoyed about a re-opening of China, the US’s shift to green investment (a $369bn subsidy bonanza), Europe’s adjustment to the war in Ukraine and the recent drop in energy prices. The global institution of US economic power still sees recession in 2023, but believes that by 2024 the economy will be back to growth, woo hoo!

Nevertheless, some business leaders fear that China’s growth may not be sustained, see page 6 of today's UK edition, inflation will continue to be a problem and if the EU doesn’t turn on the green subsidy spigot, like the Americans have, the outlook might not be so cheerful. The EU, though, is keen to dispel this idea, see page 8. To this, I would add that the GOP’s revolt against the green energy transition may also impact negatively.

Over the the last week or so it would appear that the financial world and the FT are becoming more confident that the coming recession will be limited. There are still many warnings everyday, but the market psychology appears to be turning optimistic, which is crucial.

Of course despite the up-tick in confidence the structural issues with the global economy continue. Namely, that without Central Banks’ (CBs) cheap credit, cracks are beginning to show in the sustainability of capital. In addition, the US’s decision to, in effect, de-couple the global economy with its various protectionist policies aimed at Russia, China and the EU (see US War Watches)will create stresses too. While labour around the world is either agitated by growing inequality and poverty, and showing it publicly in many countries, or seeing their wages increase which is stressing CBs. The latter’s response is to raise interest rates which causes more stress on the global economy.

Therefore it looks like the economy is going to be stuck in a loop that goes from crisis to stability, and back again for some time. The solution around the world seems to be de-coupling from the system which will be managed by a shift to more authoritarian regimes, some remaining democratic others not, that are underpinned by the new technology advances that serve two purposes. First, enabling financial capital to burrow down in to data to continue exploiting the disappearing areas of opportunities left, and, second, containing ever cantankerous labour.


Alright, that's all for today, see you soon!





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