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Global are too complacent about downside economic risks, exacerbating, but not limited to, the growing impact of coronaviruses.

They underestimated the power to change the nature of the world economy-in the face of the US-China decoupling problem, the degree of "deglobalization" is constantly increasing. At the same time, they overestimated the power of monetary and fiscal stimulus to keep the Global Economic Party going.

When the G-20 finance ministers meet in Riyadh this weekend, they will meet while the world's ten major economies are slowing down and some are facing recession. Next week, Beijing may announce the postponement of its National People's Congress due to a coronavirus outbreak.

this week, apple There are fears of more trouble for global due to revenue warnings caused by the coronavirus. The full chain reaction of the and the economic impact of people's fear of being with others will emerge in the first quarter results, especially in tourism, travel, and dependence on China's supply chain and markets.

Nonetheless, investor complacency has largely persisted due to fundamental misunderstandings about the speed with which the world is changing economically and politically. We are only in the beginning of this new era of high-power competition and technological change, and no model can "count" its impact.

Within democracies, public belief has been shaken by capitalism and globalization, with results that bring greater prosperity. This has driven everything lately, from the recent victory in the Irish elections to Sinn Fein, to Britain's departure from the European Union, and the collapse of Germany's political .

The market is betting that a combination of fiscal and monetary measures will prevent the worst from happening again. But what if they are wrong?

Most dramatically, this year's U.S. presidential election could create a showdown between two different factions with similar decibel populists, Donald Trump and Bernie Sanders. Both are insurgents in the 1970s, both of whom are attractive to core, unconventional constituencies, which has attracted global attention that the new US normality may be abnormal.

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All this takes place in the context of a major test of power, at the core of which is the systemic struggle between the model of democracy and authoritarian capitalism. Although traditional security analysts continue to worry that US-China, US-Russian or US-Iranian tensions may evolve into armed conflicts, the more likely outcome is limited resources and ongoing competition that lacks momentum but involves information warfare , Cyber ​​attacks and economic conflicts, from trade wars to targeted sanctions.

But let's go back to investors and their complacency. It's easy to explain, and it's getting harder to justify it.

Since the 1990s, whenever the global economy is nearing the edge Major financial crisis in 2008-In 2009, some interventions made us flinch. The last time was last year, when it seemed that the global economy might slow down to less than 2% of GDP growth, and is generally considered a way to measure the start of the global economic downturn.

The central bank stepped up. As the International Monetary Fund Point outLast year, 49 central banks cut 71 times. According to the International Monetary Fund, the result was a 0.5% increase in global GDP. Monetary policy saved the day.

Investors understand that coronavirus could be a major shock in 2020, but they bet again, and it will definitely prevent this from becoming an economic disaster. Recognizing that the Federal Reserve and other central banks may have fewer monetary instruments, they are counting on the government to increase fiscal stimulus.

For example, Chinese lenders on Thursday cut the maximum one-year loan rate they use across the financial system by 0.1% to 4.05%. of result Chinese stocks rose 2.2% on the benchmark Shanghai and Shenzhen 300 Index that day.

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Prior to this, the People's Bank of China this week cut interest rates on intermediate-term loans and dozens of other measures in Beijing recently to support companies hit by the epidemic. Financial Times report So far, the People's Bank of China has provided 300 billion yuan to large lenders and local banks in the hard-hit areas, especially Hubei Province.


Even so, S & P Global Ratings predicts that if the coronavirus lasts until April, China's 2020 growth rate may fall from 6% last year to 4.4%. Most such forecasts are likely to be optimistic, so if the coronavirus subsides, China's economy will make up most of the losses, which may be wishful thinking.

At the same time, the euro area economy had almost no growth in the fourth quarter of 2019, only 0.1% higher than the previous quarter, the slowest growth rate since 2013. Growth in Germany was zero. The real GDP of the euro area increased by only 0.9% in 2019, the lowest level since 2013. [As Britain now leaves the European Union, its leaders failed to reach consensus on its budget on Friday due to indivisible divisions.]

Governments all over the world see these clouds, and Bloomberg survey Economic forecasts show that more than half of the world ’s 20 largest economies are relaxing their national budgets, providing some of the fiscal stimulus packages that central bankers have been seeking from government agencies.

The market is betting that a combination of fiscal and monetary measures will prevent the worst from happening again.

But what if they are wrong?

In addition to the United States, major central banks have also been eliminated, and some of them are trying negative interest rates. Some experts believe that our low interest rate environment allows more borrowing for fiscal stimulus.

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It was a risky business.

Near the end

Global debt is Approaching 244 trillion US dollars is the highest level on record, which is not a good record. Since World War II, developed countries have the highest public debt. In the latest report of the Atlantic Council, Global Risk Report 2035, Author Mathew Burrows explores a worst-case scenario, which he calls "into chaos." First, the debt burden continues to increase, first hitting China and then spreading to the Western world, triggering a global economic collapse.

Burrows is not predicting the timing of the global economic downturn. At such uncertain times, however, it is unwise to focus on expanding debt.

Investors are counting on scripts from the past decade to last longer.

It's a risky bet with this year's coronavirus, slower growth, increased debt, and rising geopolitical uncertainty. Our bull market is coming to an end, and that is the tenth year of the seven-year cycle.

Frederick Kempe is a best-selling author, award-winning journalist and chairman and CEO of the Atlantic Council, one of the most influential think tanks in global affairs in the United States. He has worked for the Wall Street Journal for more than 25 years as a foreign correspondent, assistant editor-in- and the longest serving editor of the European version of the paper. His latest book, Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Places on Earth, is the bestseller of The New York Times and is published in more than ten languages. Follow him on Twitter @FredKempe And sPost here At the turning point, he would look at the hot news and trends of the past week every Saturday.

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